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•1E    THREE    SYSTEMS 
LIFE    INSURANCE 


m 


LIBRARY 

OF    THE 

UNIVERSITY  OF  CALIFORNIA. 


THE  THREE  SYSTEMS 


OF* 


LIFE  INSURANCE 


I.  THE  LEVEL  PREMIUM  SYSTEM. 

II.  THE  NATURAL  PREMIUM  SYSTEM. 

III.  THE  ASSESSMENT  SYSTEM. 


Originally  compiled  by  the  late  MERVIN   TABOR, 

(formerly  actuary  of  the  Insurance  Department 

of  Illinois),  and  carefully  corrected 

and  revised  to  the  year  1900, 


NEW    YORK. 

THE  SPECTATOR  COMPANY. 
1900. 


£RAL 


Copyright,  1900 

THE  SPECTATOR  COMPANY 

NEW  YORK 


PUBLISHER'S  PREFACE. 

The  first  edition  of  "The  Three  Systems  of  Life  Insurance" 
was  prepared  by  the  late  Mervin  Tabor,  at  one  time  actuary 
of  the  Illinois  Insurance  Department,  and  issued  in  1885. 
So  warm  was  the  reception  accorded  the  work  on  account  of 
its  being  written  in  a  manner  so  clear  and  concise,  as  to  ap- 
peal to  the  public  at  large,  that  it  speedily  ran  through  several 
large  editions,  The  Spectator  Company  having  meantime  pur- 
chased the  copyright  and  electroplates,  on  the  death  of  Mr. 
Tabor,  and  the  work  having  since  been  issued  under  its  aus- 
pices. 

In  this,  the  eighth  edition,  the  publishers  have  caused  the 
work  to  be  carefully  revised  in  accordance  with  the  principles 
of  modern  life  insurance  practice.  Inasmuch  as  the  division 
of  life  insurance  under  three  systems,  as  laid  out  by  Mr. 
Tabor,  has  not  undergone  any  material  change,  the  same 
division  has  been  followed  in  the  current  edition.  The  lead- 
ing system  is,  of  course,  the  level  premium  or  old  line,  under 
which  premiums  remain  fixed  as  at  age  of  entry,  a  larger 
amount  than  is  absolutely  necessary  being  collected  in  the 
earlier  years  in  order  to  avoid  increasing  the  cost  in  later 
years  when  the  increased  number  of  deaths  causes  a  larger 
drain  upon  the  funds.  The  natural  premium  system  is  equally 
as  scientific  as  the  level  premium,  differing  only  by  collecting 
for  each  year  the  actual  cost  as  indicated  by  the  mortality 
tables,  which  implies  steadily  increasing  premiums.  The  as- 
sessment system  merely  aims  to  collect  from  year  to  year  an 
amount  sufficient  to  pay  the  claims  actually  incurred  during 
that  year;  no  provision  is  made  for  increasing  cost,  and,  as  a 
result,  the  assessments  increase  after  a  few  years,  both  in 
number  and  amount  to  the  great  dissatisfaction  of  those  hold- 
ing assessment  policies. 

"Three  Systems  of  Life  Insurance"  is  not  only  an  exposi- 
tion of  the  methods  of  conducting  the  business,  but  is  also 
largely  historical.  In  revising  the  book,  therefore,  the  pub- 
lishers have  kept  in  mind  its  value  as  a  book  of  historical 
reference,  and  have  caused  such  matter  to  be  added  as  will 
bring  the  work  up  to  date,  thereby  furnishing  a  condensed 
history  of  life  insurance  on  general  lines  brought  down  to 
the  year  1900. 

"Three  Systems  of  Life  Insurance"  has  long  been  accepted 
as  a  standard  authority.  It  gives  a  variety  of  information 

115512 


4  PREFACE. 

unobtainable  elsewhere,  and  is  written  in  such  a  simple  and 
graphic  style  that  the  ordinary  layman  can  understand  every 
word  of  it.  The  work  is  not  filled  with  technical  terms  or 
scientific  formula.  Wherever  it  has  been  necessary  to  use 
such  terms  or  formulae  they  have  been  carefully  and  clearly 
explained.  It  is  hardly  necessary  to  say  that  the  book  was 
originally  written  without  bias  or  prejudice,  and  that  the  re- 
vision has  been  conducted  in  the  same  spirit.  The  publishers 
offer  this  new  and  revised  edition  with  the  confidence  that  it 
will  serve  for  the  enlightenment  of  the  public  on  the  im- 
portant subject  of  life  insurance  as  well  as  past  editions  have 
done.  THE  SPECTATOR  COMPANY. 


CONTENTS. 

[Full  Index  will  be  found  in  the  last  pages  of  the  book.] 

PAGE. 
Introduction   7 

CHAPTER    I. 

Fire  Insurance. — Life  Insurance. — The  Law  of  Mortali- 
ty.— How  Mortality  Tables  Are  Made. — The  Two 
Tables  Used  Most  Extensively  in  America 15 

CHAPTER   II. 

Actuary. —  Assets. —  Brokerage. —  Commissions.  —  Stock 
Companies. — Mixed  Companies. — Contribution  Sys- 
tem of  Dividends. — Cash  Dividends. — Reversionary 
Dividends. —  Expectation  of  Life. —  Forfeiture. — 
Lapse. — Loading. — Loss. — Mortality  20 

CHAPTER  III. 

Policy. — Single-Payment  Life. — Five-payment  Life. — 
Ten-Payment  Life. — Fifteen-Payment  Life. — Twenty- 
Payment  Life. — Ordinary  Life. — Term  Life. — Re- 
newable Term  Life 25 

CHAPTER   IV. 

Endowment  Insurance. — Ordinary  Endowments. — Lim- 
ited-Payment Endowments. — Endowment  Compared 
with  Term  Insurance. — The  Investment  Element. — 
The  Insurance  Element 29 

CHAPTER   V. 

Tontine  Insurance. — Semi-Tontine  Insurance. — Senate 
Resolution  No.  100  of  the  Ohio  Legislature. — A  Com- 
mittee of  Investigation. — Report  of  the  Committee. — 
Lapses  of  Tontine  as  Compared  with  Non-Tontine 
Insurance. — Dividends  on  Tontine  and  Non-Tontine 
Policies. — Accumulative  Dividend. — Distribution. — 
Bonus  Policies,  etc 37 

CHAPTER  VI. 

Premiums. — Premium  Notes. — Surplus. — Value  of  a 
Policy. — The  Reserve. — Abstract  of  Net  Values. — 
Life  Insurance  Failures. — Life  Insurance  Expenses. — 
Growth  of  Life  Insurance 52 

CHAPTER   VII. 

The  Level  Premium  System. — Its  Distinguishing  Charac- 
teristics.— Requisites  for  Soundness  and  Perma- 
nency.— Analysis  of  a  Level  Premium. — The  Reserve 
Element. — The  Mortality  Element. — The  Expense 
Element. — Sources  of  Dividends. — Lapses  and  For- 
feitures.— Cash  Surrender  Values,  etc.,  etc 63 


6  CONTENTS. 

CHAPTER  VIII. 

Modern  Level  Premium  Contracts. — Numerous  New 
Forms. — Elimination  of  Restrictions. — Extension  of 
Non-Forfeiture  Principles. — Instalment  and  Continu- 
ous Instalment  Contracts. — Investment  Insurance. .  74 

CHAPTER    IX. 

Non-Forfeiture  Laws. — The  Massachusetts  Non-Forfeit- 
ure Law  of  1880. — Letter  from  Elizur  Wright  and 
Massachusetts  Life  Companies. — Amendments  of 
1887  and  1896. — New  Law  of  1900 79 

CHAPTER    X. 

The  Non-Forfeiture  Laws  of  Maine. — Michigan. — Ken- 
tucky.— Missouri  92 

CHAPTER    XL 

The  New  York  Insurance  Law  of  1880 — Amendment  of 
1892. — Non-Forfeiture  Laws  of  California,  Colorado 
and  New  Jersey. — Deposit  Laws  of  Iowa  and  In- 
diana.— Law  with  Reference  to  Reserves. — An  As- 
sumed Example  of  a  Deferred  Dividend  Policy. — Re- 
sults of  Matured  Tontine  Policies. — Surrender  Values 
in  a  Deferred  Dividend  Contract 99 

CHAPTER    XII. 

The  Natural  Premium  System. — Its  Distinguishing  Char- 
acteristics.— Requisites  for  Soundness  and  Perma- 
nency.— The  Elements  of  a  Level  Premium  Com- 
pared with  the  Elements  of  a  Natural  Premium. — 
Uniform  Per  Centum  Loading  Discussed 114 

CHAPTER   XIII. 

The  Assessment  System. — Its  Distinguishing  Characteris- 
tics.— Requisites  for  Soundness  and  Permanency. — 
Assessment  Failures. — Stipulated  Premium. — The 
New  York  Stipulated  Premium  Law 126 

CHAPTER   XIV. 

Synopsis  of  the  Massachusetts  Law  of  1885  on  Assess- 
ment Insurance,  by  John  K.  Tarbox. — "Co-operative 
Business,"  by  John  A.  McCall. — "Co-operative  In- 
surance," by  Ephraim  Williams. — Remarks  on  the 
Grouping  of  Different  Ages  for  Purposes  of  Assess- 
ment.— Fraternal  Orders. — Fraternal  Congress  Mor- 
tality Table  145 

CHAPTER   XV. 

Article  on  Interest — Interest  Laws  of  the  States  and  Ter- 
ritories.— Penalties  for  Violation  of  the  Same 156 

Explanation  of  the  Tables 160 

Tables   166-200 


INTRODUCTORY. 


INTRODUCTION. 

The  following,  from  the  introductory  remarks  of  Mervin 
Tabor  to  the  first  edition  of  The  Three  Systems,  explains  the 
object  of  the  work: 

The  idea  of  publishing  the  work  here  presented  did  not  sug- 
gest itself  until  much  of  the  material  that  it  contains  had  accu- 
mulated for  private  use. 

Many  letters  from  different  localities  throughout  the  United 
States  and  Territories,  and  from  Canada,  asking  for  informa- 
tion, came  to  the  author,  covering  a  wide  range  of  inquiry 
upon  subjects  involving  the  elementary  principles  of  Life 
Insurance.  The  following,  copied  at  random  from  a  few  of 
these  letters,  will  convey  an  idea  of  their  general  scope: 

1.  What  is  a  Mortality  Table,  and  where  can  I  obtain  one? 

2.  What  is  the  difference  between  the  reserve  and  the  surplus  of  a 

company? 

3.  Why  is  the  dividend  on  a  Life  Policy  larger  the  tenth,  than  it  is 

the  fifth,  year? 

4.  I  have  one  policy  that  was  taken  out  nearly  thirty  years  ago,  but 

the  dividend  this  year  is  not  so  large  as  it  was  ten  years  ago. 
I  have  another  tJiat  is  only  six  years  old,  and  the  dividend  has 
increased  every  year.  Why  is  this? 

5.  Why  can't  Life  Insurance  be  done  tlie  same  way  that  Fire  In- 

surance  is? 

6.  Please  explain  Endowment  Insurance. 

7.  What  is  Tontine  Insurance? 

8.  What  is  meant  by  the  expression,  "  Actuaries'  4  per  cent."? 

9.  Please  explain  the  new  Massachusetts1  Non- Forfeiture  Law. 

10.  WJiat  do  you  think  of  the  Homans  plan  of  Insurance?    Isn't 

it  Assessment  Insurance  in  a  new  dress? 

11.  Which  is  the  best  ASSESSMENT  COMPANY  ? 

12.  An  agent  tells  me  that  the  New   York  Non- Forfeiture  law  com- 

pels all  New  York  companies  to  pay  a  definite  amount,  in 
cash,  for  a  policy  after  it  has  been  running  three  or  more 
years.  Please  explain  this,  How  does  it  differ  from  the 
Massachusetts'  law? 


8  INTRODUCTORY. 

13.  Is  there  any  good  Assessment  Company  that  issues  Endowment 

Life  Insurance  policies? 

14.  What  is   meant  by  "  T7ie  Expectation  of  Life,"  a  phrase  used 

so  often  by  Life  Insurance  men? 

15.  What  are  the  sources  of  dividends   in  the    "  Old  Line"  com- 

panies? Why  can't  we  pay  less  for  insurance  and  not  receive 
any  dividends? 

16.  I  want  $10,000  life  insurance  to  be  paid  for  in  ten  years,  as  an 

estate  to  go  to  my  wife  and  children  after  my  death.  I  also 
want  $10,000  payable  to  my  boy,  now  six  years  old,  when  he  is 
twenty-one,  or  to  a  trustee  for  him  should  I  die  before  he  does; 
and  I  want  $10,000  for  the  next  ten  or  fifteen  years,  the  cheap- 
est insurance  that  can  be  had  consistent  with  security.  Please 
give  me  the  information  necessary  for  an  intelligent  selection 
of  companies,  and  send  bill  for  services. 

17.  An  agent  has  been  in  to  see  me  several  times  trying  to  insure 

me  for  $10,000  on  what  he  calls  the  "  The  Reserve  Addition" 
plan,  or  "  The  Accumulation"  plan,  I  think  it  is.  I  am  to 
pay  for  it  in  ten  years,  and  he  says  that  at  the  end  of  nine- 
teen years  I  will  recewe  the  $10,000,  in  cash,  if  I  live  until 
then,  but  if  I  die  before  that  time  my  wife  will  receive  the 
whole  amount.  Do  you  think  a  company  can  do  such  a  thing? 
Please  ansicer  in  detail  and  send  your  bill. 

18.  If  1  insure  for  $10,000,  and  die  the  first  year,  how  can  a  com- 

pany afford  to  pay  my  wife  and  children  the  $10,000?  I  don't 
understand  it.  Please  explain  and  send  charges. 

19.  What  is  an  actuary?    Do  they  have  actuaries  in  fire  insur- 

ance companies? 

20.  How  can  an  ASSESSMENT  COMPANY  safely  issue  Endowment 


21.  What  are  REVERSIONARY  ADDITIONS  or  DIVIDENDS? 

22.  What  is  the  difference  between  "OLD  LINE"  insurance  and 

ASSESSMENT  insurance?    Are  not  the  principles  upon  which 
they  are  based  the  same? 

23.  Is  there  any   good  ASSESSMENT  COMPANY  that  makes  assess- 

ments only  three  or  four  times  a  year,  at  stated  fixed  dates? 

Please  reply . 
21,.   Why    are    the    "OLD    LINE"    called    "LEVEL     PREMIUM'* 

companies? 
25.   Why  is  it  necessary  that  so  many  of  the  Mutual  (i  OLD  LINE" 


INTRODUCTORY.  9 

companies  Jiave  so  much  money  ' '  in  reserve"  as  they  call  it? 
If  they  are  Mutual,  why  don't  they  pay  back  to  their  members 
this  money,  and  not  pile  it  up  to  be  preyed  upon,  perhaps,  by 
avaricious  officers?  I  don't  understand  it.  Please  explain. 

26.  What  is  a  "  natural  premium"? 

27.  I  have  had  a  policy  in  the Company  for  nearly  sixteen 

years,  and  I  asked  what  they  would  pay  me  for  it,  in  cash, 
and  they  won't  pay  a  red  cent!  They  say  that  they  are  selling 
insurance,  not  buying  it.  (This  gentleman  describes  his 
policy — tells  how  much  he  has  paid  on  it,  in  cash,  and 
wants  to  know  if  it  is  worth  anything.) 

The  above  extracts  from  a  few  of  the  thousands  of  letters 
received  sufficiently  indicate  the  eagerness  with  which  the 
general  public  are  seeking  impartial  and  reliable  information 
on  the  subject  of  life  insurance.  One  object,  therefore,  in  the 
publication  of  this  book,  was  to  more  fully  supply  this  de- 
mand. Nearly  every  question  given  above  is  answered  in 
this  book  more  completely  than  could  be  done  by  letter,  and 
at  much  less  expense  to  the  correspondent;  besides  it  gives 
much  additional  information  that  could  not  possibly  be  com- 
municated in  one  or  fifty  letters. 

The  book  has  been  written  from  an  absolutely  impartial 
stand-point,  as  the  reader  will  readily  perceive  in  the  perusal  of 
its  pages,  and  therein  consists  one  of  its  principal  merits. 

The  Three  Systems  of  Life  Insurance  find  expres- 
sion in  the  different  conditions,  tastes  and  surroundings  of  the 
insured  and  the  insurable,  in  every  community.  They  exist,  be- 
cause there  is  a  demand  for  them. 

One  person  desires  cheap  insurance  combined  with  Invest- 
ment. The  investment  is  the  principal  idea.  He  would  not 
take  the  insurance,  no  matter  how  cheap,  without  the  invest- 
ment; but  to  secure  the  investment,  he  will  accept  the  insur- 
ance. This  man  represents  a  large  class  in  every  populous 
community.  The  Level  Premium  System,  with  its  Endow- 
ment and  Accumulative  Dividend  policies,  by  whatever  names 
designated,  supplies  the  demand. 

Another  wants  Life  Insurance  as  an  estate.  He  thinks  that 
every  one  who  has  a  family  to  support,  ought  to  indemnify  them 
against  possible  loss,  and  consequent  suffering,  by  his  death. 
He  does  not  regard  life  insurance  as  an  investment.  Indemnity 
first ;  an  estate,  afterwards,  are  the  leading  ideas.  He  be- 
lieves that  he  can  take  care  of  his  family  while  he  lives, 
and,  if  the  payments  be  limited  to  ten,  fifteen  or  twenty 
years,  he  can  pay  for  such  a  policy  during  the  productive 


10  INTRODUCTORY. 

period  of  his  life.  He  wants  a  good  policy  contract;  one 
that  will  be  Non-Forfeitable  and  incontestable,  after  a 
certain  number  of  years.  If  he  were  to  become  a  lunatic 
after  the  payment  of  several  premiums,  and  were  to  commit  sui- 
cide, perhaps,  he  does  not  want  to  involve  his  family  in  a  lawsuit 
with  a  rich  corporation.  If  from  reverses  in  business  he  were  to 
become  despondent,  and  dissolute  in  his  habits,  he  does  not  want 
his  reserves  in  the  company's  possession  confiscated.  He  wants 
a  policy -contract — and  he  will  accept  no  other — that,  after  the 
payment  of  two  or  three  years'  premiums,  in  cash,  will  be,  with- 
out further  stipulation  or  negotiation,  good  for  a  certain  amount 
of  paid-up  insurance  covering  the  whole  period  of  life;  or,  one 
that  will  be  extended  for  its  full  face  value  until  the  reserve  has 
been  exhausted  in  payment  for  such  extension.  Dividends  with 
him  are  of  secondary  consideration.  This  man  represents  a  very 
large  class,  and  its  demands  must  be  responded  to.  If  a  selection 
of  companies  be  wisely  made,  The  Level  Premium  System, 
with  its  10,  15,  or  20  annual  payment  life  policies,  fully  supplies 
the  demand. 

There  is  another  who  represents  a  different  class  from 
those  already  mentioned.  He  wants  life  insurance;  believes  in  it, 
but  thinks  that  he  can  handle  his  own  money  better  than  any  in- 
surance company  can  handle  it  for  him.  He  can  make  his  own 
investments,  as  he  expresses  it.  He  wants  pure  insurance,  for  a 
definite  amount  guaranteed  in  the  policy,  without  any  "  ifs"  or 
"provideds"  about  it,  and  he  wants  it  for  only  the  productive 
period  of  his  life,  and  it  must  be  cheap.  He  prefers  to  pay  for 
it,  quarterly,  in  advance.  When  he  pays  his  premium,  he 
wants  to  know  how  much  he  is  paying  for  insurance;  how  much 
for  expenses,  and  how  much  for  contingencies.  He  is  willing  to 
pay  an  equitable  amount,  from  quarter  to  quarter,  for  a  definite 
amount  of  insurance,  including  expenses  and  contingencies,  but 
not  one  penny,  additional,  to  accumulate  in  the  treasury  of  the 
company,  and  that  can  not  be  used,  if  necessary,  in  payment  of 
current  death  claims.  He  is  willing  to  pay  for  such  insurance  at 
an  increasing  cost  from  year  to  year,  as  age  increases.  To  this 
demand  from  a  very  numerous  class,  The  Natural  Premium 
System  responds. 

And  there  is  yet  another  who  represents  an  entirely  different 
class.  Neither  of  the  two  systems  named  conforms  to  either  his 
ideas  or  his  purse.  He  wants  to  pay  for  a  thing  when  he  gets 
it ;  not  before.  The  idea  of  fifty  or  a  hundred,  or  several  hun 
dred  individuals,  more  or  less,  associating  themselves  together  in 
a  kind  of  society,  or  brotherhood,  and,  whenever  one  of  their 
number  dies,  each  of  the  remaining  members  to  pay  a  certain 
sum  named  to  the  bereaved  family,  this  plan  of  insurance,  as 
he  calls  it,  seems  to  commend  itself  to  him.  They  may  all  be 
engaged  in  the  same  occupation,  conductors,  engineers,  &c.,  &c.; 


INTRODUCTORY.  11 

or,  they  may  be  employed  In  the  different  departments  of  the 
same  corporation,  or  of  s'milar  corporations  in  different  parts  of 
the  country  ;  or,  they  may  be  members  of  the  same  secret  society, 
board  of  trade,  or  produce  exchange,  and,  although  no  definite 
sum  is  named  to  be  paid  to  the  widow  and  children  of  a  deceased 
brother,  yet  each  contributes  what  he  had  pledged,  when  the  emer- 
gency occurs.  Such  societies  exist  in  response  to  the  demands 
of  a  very  large  class  of  respectable  people.  They  are  called 
assessment  societies.  It  is  true  that  not  one  scientific  prin- 
ciple upon  which  sound  life  insurance  is  based— except  that  of 
association— enters  into  the  organization  of  this  kind  of  socie- 
ties ;  but  in  thousands  of  instances  the  contributions,  thus  made, 
have  paid  all  the  funeral  expenses,  and  a  very  considerable 
sum  has  been  left  with  which  to  provide  shelter,  food,  fuel,  and 
clothing  for  the  bereaved  family  !  Who  can  have  a  heart  so 
pulseless  and  cold  as  to  not  feel  glad  that  the  otherwise  shelter- 
less, homeless,  penniless,  widowed  mother,  and  the  fatherless 
children  have  thus  found  relief,  though  it  be  but  temporary, 
through  the  benefactions  of  these  most  primitive  assessment 
societies  ?  In  some  of  them  are  to  be  found  well  to-do  men. 
Many  of  them  are  insured  in  other  organizations,  and  in 
the  Level  premium  companies,  but  they  have  become 
members  of  these  societies,  mainly,  in  a  great  many  instances, 
to  help  and  encourage  those  who  are  not  able  to  pay  for  any 
other  kind  of  indemnity.  Among  them  are  foremen  of  the 
different  departments  of  large  manufacturing  establishments, 
and,  not  infrequently,  the  manufacturers  and  the  railroad 
officials  themselves. 

There  is  another  class  of  assessment  societies  that  has 
been  organized  on  quasi  scientific  principles.  A  mortality  table,  or 
the  rates  of  some  Level  premium  company,  was  consulted;  but, 
in  a  large  number  of  cases,  the  leaders  who  took  the  initiative 
in  the  organizations,  were  not  sufficiently  familiar  with  the  sci- 
ence of  life  insurance  to  know  how  to  utilize  them.  The  mem- 
bership is  separated  into  classes,  according  to  their  ages,  each 
class  including  several  ages.  "  Once  in  a  class  always  in  the  same 
class/'  is  their  motto,  and  the  assessment  for  each  death  is 
never  to  be  increased.  This  distinctive  feature  is  kept  well  in 
the  foreground  as  one  of  the  reasons  for  becoming  a  member. 
"Your  assessment  will  never  be  increased."  The  reason  given 
by  one  of  this  class,  for  not  increasing  the  rate  of  assessment, 
as  the  age  increases  and  consequently  the  cost,  is  the  following  : 

"  And  as  they  advance  in  age  the  cost  to  a  member  does  not  in- 
crease, for  every  death  in  the  ranks  is  replaced  by  a  vigorous  young 
mernlxT,  and  the  average  mortality  forever  remains  about  the  same." 

The  organizers  of  this  class  of  societies  did  not  seem  to  com- 
prehend the  fact  that  when  a  member  was  classified  at  age  60, 


12  INTRODUCTORY. 

for  instance,  with  a  permanent  rate  of  assessment  at,  say,  $1.80 
for  each  death,  he  might  live  to  be  75,  when  the  cost  of  carrying 
him  would  be  more  than  three  and  a  half  times  as  much  as  when 
he  entered  the  society.  It  is  at  this  class  of  societies  that  the 
Level  premium  companies  have  fired  their  most  effective  missiles, 
and  with  the  most  fatal  results.  Hundreds  of  them  have  run  for 
a  few  years  and  then  retired,  the  direct  results  of  unscientific 
rating.  Such  societies  may  be  found  all  over  this  country,  strug- 
gling to  perpetuate  an  existence.  Their  efforts  remind  one  of  an 
attempt  to  build  a  high  tower,  at  an  angle  of  thirty-three  and 
one-third  degrees  off  the  perpendicular.  Such  a  tower  may  be 
built,  quite  high,  if  the  base  be  broad  ;  but,  if  continued,  after  a 
time  the  center  of  gravity  will  fall  outside  the  base  when  the 
structure  will  tumble  ;  not  necessarily  because  the  workmen  were 
inefficient,  nor  that  the  bricks  and  mortar  were  of  bad  materials, 
but  because  they  were  building  against  the  great  law  of  gravita- 
tion. It  might  be  propped  up  for  a  time,  and  the  work  of  con- 
struction be  continued,  but  eventually  the  structure  will  fall  to 
the  ground,  a  shapeless  mass  of  bricks  and  mortar.  Thus  has  it 
been,  and  it  always  will  be,  with  this  class  of  assessment  socie- 
ties. When  one  of  these  has  been  in  existence  long  enough  for 
its  center  of  gravity  to  fall  outside  its  base,  it  has  tottered, 
reeled,  and  then  fallen  to  the  ground.  They  have  fallen  like 
dead  leaves  of  the  forest  before  the  autumnal  blasts  !  There  is 
nothing  known  in  the  whole  range  of  life  insurance  mathematics 
and  experience  that  can  compensate  for  such  unscientific  rating. 
New  blood  can  not  do  it.  It  may  postpone  the  day  of  retribu- 
tion, for  several  years,  even,  but  it  is  sure  to  come.  It  is  the  pen- 
alty for  violation  of  the  great  law  of  mortality,  that  pervades  the 
entire  human  family. 

It  is  not  the  province  of  this  work  to  advocate  any  one  system 
of  life  insurance  to  the  exclusion  of  the  others.  Its  purpose 
is  to  portray  the  characteristic  features  of  the  THREE  SYSTEMS, 
and  to  point  out  the  requisites  for  soundness  and  permanency 
as  dictated  by  scientific  and  recognized  business  principles.  No 
comparisons  are  made  except  to  define  technical  terms,  and  to 
illustrate  principles.  The  examples  of  real  policies  used  quite 
freely  are  for  the  sole  purpose  of  illustration,  and,  in  order  to 
avoid  the  very  appearance  of  favoritism  the  names  of  the  com- 
panies that  issued  them,  and,  also,  of  the  persons  insured  by 
them,  are  purposely  omitted. 

Considerable  space  is  occupied  in  explaining  the  various 
forms  of  insurance,  because  there  seems  to  be  at  the  present 
time  a  demand  for  unbiased  and  reliable  information  on 
these  subjects. 

Tontine  insurance  was  vigorously  assaulted  for  years 
through  the  leading  press,  East  and  West.  Mr.  Wolcott,  of 


INTRODUCTORY.  13 

the  Ohio  Senate,  expressed  it  in  the  preamble  of  his  reso- 
lutions, calling  for  an  investigation  of  the  subject,  as  follows: 

"WHEREAS.— Complaints  for  several  years  past  have  become 
general  in  Ohio,  against  the  inequitable  and  unjust  plans  and 
methods  of  the  Tontine  insurance  business  as  conducted  by  such 
companies  foreign  to  Ohio  ;  and, 

1 '  WHEREAS.— The  leading  journals  of  this  and  other  States 
have  recently  made  startling  exposures,  if  true,  of  such  plans 
and  methods,  which  are  most  unjust  to  policy-holders  in  such 
companies ;  and 

"WHEREAS.— Legislation  seeking  to  arrest  abuses  and  to  protect 
the  people  of  Ohio  has  been  instituted  by  this  GENERAL  ASSEMBLY; 
now,  therefore,  for  the  purpose  of  aiding  such  legislation  and 
furnishing  necessary  information  to  the  insurance  department  of 
Ohio  as  a  basis  for  future  legislation,  Be  it  Resolved,  <kc.,  &c." 

The  resolutions,  in  full,  as  well  as  the  committee's  report  after  it 
had  completed  its  examinations,  may  be  found  in  the  following 
pages : 

Considerable  space  has  also  been  given  to  the  discussion  of 
the  Massachusetts'  Non-Forfeiture  law  of  1881.  There  seems  to 
exist  a  difference  of  opinion  with  reference  to  the  cash-surrender 
value  feature  of  this  law.  A  correspondence  was  therefore  had 
with  all  the  Massachusetts  companies,  and  with  the  Hon  Elizur 
Wright,  with  reference  to  that  particular  feature  of  the  law. 
This  correspondence  is  both  interesting  and  instructive,  and  it 
has  been  given,  therefore,  to  the  readers  of  this  book,  together 
with  several  assumed  examples  of  policies  illustrating  the  general 
features  of  the  law. 

As  this  book  has  been  written  mainly  for  the  public  in  gen- 
eral, extreme  care  has  been  exercised  in  the  use  of  technical 
terms.  If  forced  to  use  them  they  have  either  been  fully  de- 
fined in  preceding  pages,  or  they  are  explained  where  used. 
Such  expressions  as  Actuary,  Reversionary  Dividends;  Ac- 
tuaries' 4  per  cent;  American  4  per  cent;  Net  Value  of  a 
Policy;  Legal  Reserve;  Tontine,  Semi-Tontine,  Accumula- 
tion, Distribution,  etc.,  etc.,  are  defined  in  their  appropriate 
,places. 

The  attention  of  the  reader  is  called  to  the  analysis  of 
Endowment  Insurance,  in  Chapter  IV,  commencing  on 
page  29.  The  Endowment  is  a  very  popular  form  of  insurance, 
because  it  provides  indemnity  in  a  double  sense  ;  indemnity  to  the 
family  or  other  beneficiary,  in  the  event  of  the  death  of  the  in- 
sured within  a  specified  period  of  time — usually  ten,  fifteen, 
twenty,  or  twenty-five  years— and  indemnity  against  possible 
want  and  suffering  at  some  future  time  growing  out  of  financial 
embarrassment.  Much  the  larger  portion  of  the  payments  made 
on  an  endowment  policy  is  guaranteed  to  earn  compound  inter- 
est, whether  the  insured  die  during  the  endowment  period  or 
live  until  its  expiration.  This  subject  is  fully  illustrated  by 
assumed  and  actual  examples  of  policies. 


14  INTRODUCTORY. 

The  article  on  Life  Insurance  Failures,  page  54,  taken  from 
a  pamphlet  entitled  "Life  Insurance,"  etc.,  published  by  the 
Globe  Newspaper  Co.,  Boston,  is  worthy  of  careful  perusal. 

The  Article  on  Life  Insurance  Expenses,  page  59,  by  which 
the  expenses  of  life  insurance  companies  are  compared  with 
those  of  fire  insurance,  and  railroad  corporations,  will  be  a 
surprise  to  those  who  are  not  already  familiar  with  the  facts. 

Chapter  VII. ,  page  63,  commences  the  analysis  of  The  Three 
Systems  of  Life  Insurance,  beginning  with  the  Level  Pre- 
mium system.  In  this  and  the  ^following  chapters  the  dis- 
tinguishing characteristics  of  the  Three  Systems  are  discussed, 
together  with  The  Requisites  for  Soundness  and  Permanency. 
The  reserve  in  the  Level  Premium  System;  the  reserve  in  the 
Natural  Premium  System,  and  the  reserve  in  The  Assessment 
System,  are,  each,  plainly  defined,  so  that  anyone  of  ordinary 
intelligence  may  not  only  understand  them,  but  also  detect 
their  differences.  The  reserve  in  The  Level  Premium  System 
is  entirely  different  from  that  in  either  of  the  other  two  Sys- 
tems. It  means  accumulation,  and  can  only  be  used  in  pay- 
ment of  a  claim  when  the  policy  on  which  it  is  accumulated 
matures  by  death  or  otherwise.  It  constitutes  more  than 
ninety  per  cent,  of  the  entire  assets  of  all  the  Level  Premium 
Companies.  The  reserve  on  a  policy  in  the  Natural  Premium 
System  is  at  its  maximum  at  the  beginning  of  a  policy  year, 
and  entirely  disappears  at  the  end  of  the  year.  It  is  all  used 
in  payment  of  death  claims  during  the  year,  but  it  must  be 
used  gradually.  In  the  Level  Premium,  and  the  Natural  Pre- 
mium Systems,  insurance  mathematics  and  insurance  laws  de- 
fine the  nature  and  prescribe  the  amount  of  their  respective 
reserves.  The  mathematical  and  legal  tests  are  rigidly  applied 
to  all  policies,  in  force,  at  least  once  every  year,  by  the  Insur- 
ance Departments  of  the  several  States  in  which  these  com- 
panies are  doing  business.  But  the  reserves  in  the  Assessment 
Companies  are,  to  a  large  extent,  entirely  voluntary  on  the 
part  of  the  societies  themselves.  They  can  provide  for  a  re- 
serve, as  the  better  class  of  them  do,  or  not.  It  can  be  used 
in  payment  of  current  death  claims,  at  any  time  and  in  any 
amount,  even  to  the  entire  exhaustion  of  the  fund  itself. 

Not  only  are  the  functions  of  these  different  kinds  of  re- 
serves discussed  in  the  chapters  alluded  to,  but  also  the  other 
elements  entering  into  the  formation  of  a  level  premium. 

The  Tables,  some  twenty-five  in  number,  are  a  very  prom- 
inent and  useful  feature  of  the  book.  The  Actuaries',  and  the 
American  Experience  Tables,  are  given  in  full,  with  additional 
columns,  in  each,  showing  "Per  cent,  of  Deaths  to  the  Liv- 
ing"; "Expectation  of  Life";  "Level  Annual  Premium  to  In- 
sure $1,000  for  Life";  and  "The  Natural  Premium  to  Insure 
$1,000,  one  year — ages  10  to  100,  in  the  Actuaries',  and  10  to 
96  in  the  American."  In  addition  to  the  usual  compound  in- 
terest tables,  will  be  found  several  new  ones,  and  also  a  table 
showing  the  amount  of  $i  per  annum,  for  50  years,  at  simple 
interest. 

The  several  articles  on  Interest;  Mortality;  How  Mor- 
tality Tables  are  Constructed;  the  Reserve  Element,  The 
Mortality  Element,  and  The  Expense  Element  of  a  Level  Pre- 
mium; The  Sources  of  Dividends,  and  The  Several  Non-For- 
feiture Laws  of  different  States— together  with  other  valuable 
information,  constitute  a  popular  treatise  on  the  subject  of  life 
insurance. 


CHAPTER  I. 


FIRE  INSURANCE. — LIFE  INSURANCE. — MAN  AS  PRODUCTIVE  CAPI 
TAL. — THAT  BUSINESS  BLOCK. — THE  SUCCESSFUL  CAPITALIST. 
—THE  YOUNG  BUSINESS  MAN.— THE  LAW  OF  MORTALITY.— 
How  MORTALITY  TABLES  ARE  MADE. — THE  Two  TABLES 
USED  MOST  EXTENSIVELY  IN  AMERICA. 

Fire  Insurance  is  protection  against  loss  by  fire,  and  it  is 
based  on  the  productiveness  of  the  property  insured — present  or 
prospective — and  the  possibility  of  its  destruction  by  fire. 

Life  Insurance  is  protection  against  financial  loss  by  death, 
and  it  is  based  upon  the  productiveness  of  the  person  insured — 
present  or  prospective — and  the  absolute  certainty  that  he  will 
die. 

A  healthy  body,  a  strong  will,  an  active  brain,  and  a  natural 
aptness  for  business  are  the  most  productive  property  in  the 
world.  It  has  been  said  that  when  time  was  young,  only  two 
human  beings  lived  on  this  earth.  They  lived  in  a  garden,  and 
fig  leaves  were  their  clothing.  There  were  no  business  blocks, 
no  railroads,  no  banks,  no  palatial  residences,  no  trade,  no  com- 
merce, no  money,  no  art,  no  science,  no  culture — no  material 
wealth.  All  of  these  have  since  been  produced  by  the  brain  of  man. 
One  generation  after  another  has  lived  and  passed  away,  each 
contributing  something  to  what  now  constitutes  the  wealth  of 
the  world  !  One  hundred  years  hence  every  man,  woman  and 
child  now  living  will  be  dead.  The  exceptions  only  prove  the 
rule.  Man,  truly,  is  very  productive,  and  there  is  nothing  more 
certain  than  that  he  will  die. 

Your  annual  income  on  that  business  block  is  $20,000,  more 
or  less.  You  keep  it  well  insured.  You  even  have  the  rental 
insured.  Not  because  if  it  were  to  burn  your  family  would  be 
paupers,  or  that  you  would  experience  other  than  slight  incon- 
venience from  it.  It  is  productive  property,  liable  to  burn,  and 
it  is  business  like  to  protect  such  property.  If  you  owned  a 
thousand  such  blocks  you  could  assume  the  risk,  yourself;  but 
you  own  but  one  block,  and  you  can  no  more  afford  to  carry  the 
risk  on  one  block  than  you  can  afford  to  carry  one  letter  to  San 
Francisco  for  two  cents.  The  companies  can  carry  the  risk  be- 
cause they  are  carrying  the  same  kind  of  risks  on  thousands  of 


16  THE  THREE  SYSTEMS 

other  blocks,  and  their  receipts  from  all  pay  the  losses  on  the  few 
that  burn,  and  there  is  still  a  margin  left  for  profit. 

Your  block  earns  a  handsome  income.  Ton  produced  the 
block.  Which  is  the  more  valuable  property,  you  or  the  block? 
Which  is  more  liable  to  perish ;  the  block  by  fire,  or  you  by 
death?  Which  would  be  attended  with  the  more  disastrous  con- 
sequences, in  a  strictly  financial  sense  ;  the  destruction  of  the 
block  by  fire,  or  your  death,  in  the  next  thirty  days?  Would  the 
destruction  of  the  block,  uninsured,  impair  or  incumber  the  value 
of  your  other  property?  With  no  insurance  on  yourself,  would 
not  your  death,  within  the  next  thirty  days,  impair  the  value  of 
your  estate  at  least  twenty-five  to  fifty  per  cent.?  The  average 
duration  of  a  class  of  lives  is  certain,  but  there  is  no  certainty  of 
the  duration  of  one  life.  When  you  have  your  buildings  and  mer- 
chandise insured,  you  protect  yourself  against  what  may  occur ; 
but,  when  you  have  yourself  insured,  you  protect  your  family 
against  what  must  occur.  Fire  insurance  is  protection  against  a 
possible  calamity;  but  life  insurance  is  protection  against  an 
absolutely  certain  calamity. 

One  may  possess  those  very  rare  and  indefinable  qualities  of 
mind  that  always  insure  success.  Everything  he  touches  changes 
to  gold  dollars  and  a  great  many  of  them.  When  he  purchases 
stocks,  they  are  at  the  lowest;  and  when  he  sells,  they  are  as 
mysteriously  at  the  highest  Under  his  magic  touch  wealth 
increases,  he  hardly  knows  how,  so  natural  is  it  for  him  to  con- 
trol the  wealth  producing  elements  that  surround  him.  When 
his  plans  ripen,  they  stand  out  in  bold  relief,  emphatically  his 
own,  and  are  tenaciously  carried  out  to  a  generally  successful 
issue.  He  seems  to  be  impelled  by  a  force  which  he  has  no 
power  or  inclination  to  resist.  He  loves  to  watch  the  mental  ma- 
chinery within,  working  so  admirably,  and,  with  rare  exceptions, 
accomplishing  desired  results.  But  this  valuable  machinery  will 
not  always  last.  His  grasp  of  the  lever  will  be  gradually  loos- 
ened. He  will  trust  to  others  what  he  once  thought  could 
only  be  done  by  himself,  and  he  thought  rightly.  At  this  junc- 
ture men  of  princely  fortunes,  by  one  single  misstep,  have  lost 
all.  Some  of  our  wealthiest  men,  conscious  of  this  approaching 
epoch,  have  "  hedged/'  by  investing  largely  in  life  insurance. 

There  are  other  younger  business  men,  whose  fortunes  are 
not  yet  made,  and  who,  utilizing  the  experiences  of  others, 
have  invested  quite  extensively  in  Endowments,  Accumula- 
tive Dividend  policies,  and  other  forms  of  Life  Insurance, 
paying  for  them  during  their  present  productive  periods  of 
life.  These  insurances,  in  the  event  of  premature  death,  will 
constitute  an  estate,  together  with  other  accumulations,  as 
large,  probably,  as  if  they  had  lived  their  full  measure  of  days. 
These  young  men  have  learned  that  men  die,  and  that  they 
sometimes  die  in  the  full  strength  of  manhood,  when  their 


OF  LIFE  INSURANCE. 


17 


prospects  are  the  brightest,  before  their  well-matured  plans 
have  had  time  to  work  out  expected  results,  and  just  when 
they  have  reached  the  threshold  of  success.  They  have  seen 
such  untimely  deaths  bring  financial  loss,  and  sometimes  utter 
ruin,  to  bereaved  families.  It  was  like  the  freighted  ship 
sinking  in  full  view  of  the  safe  harbor;  or  the  costly  building 
going  up  in  smoke  and  cinders!  These  representatives  of 
American  enterprise  are  hopeful,  for  they  have  reason  to  be, 
but  there  still  remains  a  period  of  uncertainty  between  hope 
and  accomplished  results,  and  they  have  thus  bridged  it  over 
by  the  only  method  known  and  approved  by  the  best  intelli- 
gence of  the  century. 

THE    LAW  OP    MORTALITY. 

"Mortality,"  says  Dr.  Southwood  Smith,  "is  subject  to 
a  law,  the  operation  of  which  is  as  regular  as  that  of  gravitation." 

Mr.  Babbage  says:  "Nothing  is  more  proverbially  uncer- 
tain than  the  duration  of  human  life  when  the  maxim  is  applied 
to  an  individual ;  but  there  are  few  things  less  subject  to  fluctua- 
tion than  the  average  duration  of  life  in  a  multitude  of  indi- 
viduals/' 

Mr.  Walford  says  that  the  average  duration  of  life  in  Great 
Britain  at  the  present  time— 1867 — is  41  years  ;  in  France  40;  in 
Sweden,  89;  in  other  countries  progressively  downwards  until 
the  average  throughout  the  world  is  found  to  be  only  33  years. 
In  Rome,  thirteen  hundred  years  ago,  the  average  was  much  the 
same  as  in  England  now.  We  know,  however,  that  the  duration 
of  life  at  all  ages  has  increased  considerably  during  the  past  cen- 
tury. Amongst  the  nobility  and  gentry  of  England,  the  expecta 
tion  of  life  at  the  age  of  84,  is  found  to  be  four  years ;  and, 
amongst  the  poor  fishermen  of  Ostend  it  is  precisely  the  same. 
Mr.  Walford  closes  his  remarks  with  the  following  remarkable 
statement: 

"  We  have  the  very  best  of  authority  for  stating,  while  the 
mortality  of  all  the  other  epochs  of  life  is  affected  by  country,  by 
station,  and  by  a  multitude  of  influences  arising  out  of  these  and 
similar  circumstances,  the  concurrent  evidence  of  all  observation 
shows  that  at  this,  and  the  like  advanced  ages,  the  mean  term  of 
existence  is  nearly  the  same  in  all  countries,  at  all  periods,  and 
amongst  all  classes  of  society." 

The  Hon.  Elizur  Wright,  in  his  fourth  annual  report  to 
the  legislature  of  Massachusetts,  says:  "Observations  on  the 
population  of  particular  localities,  and  of  entire  nations,  on  annuL 
tants  who  have  the  strongest  pecuniary  motive  to  live,  and  who 
have  often  been  selected  for  their  strength  of  vitality,  and  on 
insured  lives  that  have  an  almost  equally  strong  pecuniary  motive 
to  die  promptly,  have  resulted  in  scales  of  decrement  differing 
so  little  from  each  other  and  from  a  regular  curve,  that  one  must 


18  THE  THREE   SYSTEMS 

be  profoundly  skeptical  not  to  believe  in  the  existence  of  a  per- 
fectly graduated  scale,  curve  or  law,  which  nature  works  after  as 
her  pattern  or  type." 

MORTALITY   TABLES. 

The  Mortality  Table  is  the  foundation  upon  which  the  science 
of  Life  Insurance  is  constructed.  Without  it  the  business  would 
be  entirely  speculative.  "Tell  me  a  man's  companions  and  I  will 
tell  you  his  character/'  says  a  distinguished  writer  ;  and  the  same 
author  also  says  :  "Tell  us  the  Mortality  Table  upon  which  an 
Assurance  office  is  based,  and  it  is  equally  possible — always 
assuming  the  existence  of  sound  management — to  predict  its 
financial  position  and  relative  advantages/' 

A  mortality  table  is  made  by  observing  the  operations  of  the 
Law  of  Mortality  as  shown  by  the  number  of  deaths  at  all  the 
different  ages  in  a  province,  kingdom,  country  or  among  insured 
lives,  and  then  collating,  analyzing  and  adjusting  the  results  so 
obtained.  The  process  of  adjustment  or  graduation  is  upon  the 
same  principle  that  astronomers  "reduce"  as  it  has  been  termed, 
their  observations  to  some  common  event  or  epoch.  It  is 
getting  rid  of  a  periodical  cause  of  fluctuation  and  presenting  a 
result  not  as  it  was  observed,  but  as  it  would  have  been  observed 
had  that  cause  of  fluctuation  had  no  existence.  Mr.  Walford 
illustrates  it  substantially  as  follows  : 

Between  the  ages  of  fifteen  and  twenty-five,  and  even  up  to 
later  ages,  the  mortality  is  kept  down  in  large  towns  by  the  in- 
flux of  healthy  people  from  the  country.  Thus,  in  the  city  of 
London,  the  annual  mortality  amongst  young  women  between 
the  ages  named,  is  only  six  per  one  thousand',  while  in  the  sur- 
rounding counties  it  is  seven  to  eight  per  one  thousand,  and 
amongst  young  men  in  London,  at  the  like  ages,  it  is  eight  per 
one  thousand.  The  solution  is  found  in  the  fact  that  healthy 
young  women  go  irom  the  country  into  London  and  other  large 
towns,  obtain  situations,  and,  if  taken  sick,  go  back  into  the 
country  to  die.  The  effect  is  to  make  the  larger  towns  look  more 
healthy  than  the  country,  at  these  ages.  Mortality  tables  con- 
structed upon  extensive  data  from  town  and  country  life  would 
not  be  materially  affected  by  such  fluctuations  ;  but  those  based 
upon  town  observations,  only,  are  certain  to  be  more  or  less  so, 
unless  subjected  to  the  processes  of  adjustment  and  graduation 
named.  The  mortality  tables  almost  exclusively  used  in  the 
United  States  are  : 

1.  The  Actuaries',  or  Combined  Experience  Table. 
—This  is  based  upon  the  recorded  experience  of  seventeen  Eng- 
lish Life  Companies.  It  was  deduced  from  83,905  insured  lives 
under  the  superintendence  of  a  committee  of  distinguished  actu- 


OF  LIFE   INSURANCE.  19 

aries  appointed  for  that  purpose,  on  the  igth  day  of  March, 
1838.  The  table  was  first  published  by  Actuary  Jenkin  Jones 
in  1843. 

2.  The  American  Experience  Table.— This  table  was 
constructed  by  the  late  Sheppard  Homans,  Actuary  of  The 
Mutual  Life  Insurance  Company  of  New  York,  from  1856  to 
1871;  author  of  "The  Contribution  System  of  Dividends." 
The  table  is  mainly  based  on  results  obtained  among  insured 
lives  in  America,  but  all  the  standard  European  tables  were 
used  in  the  processes  of  adjustment  and  graduation. 


20 


THE  THREE   SYSTEMS 


CHAPTER  II. 


ACTUARY.— ASSETS,— BROKERAGE.—  COMMISSIONS.—  STOCK  COM- 
PANIES.— MUTUAL  COMPANIES. — MIXED  COMPANIES. — CON- 
TRIBUTION SYSTEM  OF  DIVIDENDS.— CASH  DIVIDENDS.— RE 
VERSIONARY  DIVIDENDS,  OR  ADDITIONS.— EXPECTATION  OF 
LIFE.-  FORFEITURE.— LAPSE.-  LOADING.— Loss.— MORTALITY. 

Accumulation.— When  used  in  the  "LEVEL  PREMIUM  SYS- 
TEM," it  means  either  "reserve  accumulation,"  or  "dividend 
accumulation,"  For  a  full  explanation  of  the  former,  see  pages 
65  and  66.  "Dividend  accumulation"  occurs  when  a  policy 
holder,  inster.d  of  using  his  cash  dividends  in  part  payment  of 
premiums,  leaves  them  with  the  company  until  some  designated 
future  time,  when  he  can  draw  them  out  in  one  sum,  together 
with  the  interest  earned.  When  used  in  the  "NATURAL  PREMIUM 
SYSTEM,"  or  in  the  "  ASSESSMENT  SYSTEM",  of  Life  Insurance,  it 
means  a  mortality  fund,  gradually  increasing  from  year  to  year, 
in  excess  of  what  the  mortality  table  indicates  as  necessary,  to  bo 
used,  however,  in  payment  of  death  claims,  if  needed;  or,  to  be 
drawn  out  by  the  insured  at  some  designated  future  time  ;  or,  to 
be  applied  in  part  payment  of  future  premiums  or  assessments; 
or,  applied  in  some  other  way  designated  in  the  policy  or  certifi- 
cate of  membership.  The  accumulation  of  such  a  fund  is  a  wise 
precautionary  measure  by  which  the  membership  are  held  to- 
gether, or  by  which  death  claims  may  be  paid,  that  might  be 
suddenly  forced  upon  the  company  on  account  of  excessive  mor- 
tality from  epidemics,  etc.,  etc. 

Actuary. — One  who  is  proficient  in  that  branch  of  Life  In- 
surance, which  is  strictly  of  a  scientific  and  mathematical  nature. 
The  Actuary  of  a  company  makes  the  rates,  at  all  the  ages,  for 
$1,000  of  insurance  on  the  different  kinds  of  policies  issued  by 
that  company.  These  rates,  when  published  in  book  form,  are 
called  the  "rate  book"  and,  by  consulting  it  one  can  ascertain 
the  maximum  cost,  annually,  for  any  amount  of  insurance 
desired  within  the  company's  limit.  The  Actuary  also  calcu- 
lates how  much  cash  dividend  his  company  may  safely  pay  to 
each  policy-holder  at  the  next  approaching  policy  anniversary. 
When  a  policy-holder  desires  to  surrender  his  original  policy  for 
a  smaller  amount  of  paid-up  insurance;  or,  for  cash;  or,  for 


OF  LIFE  INSURANCE.  <*I 

extended  insurance;  or,  in  exchange  for  some  other  kind  of 
a  policy,  the  Actuary  is  consulted,  and  it  is  he  who  deter- 
mines, subject  to  the  approval  of  the  board  of  management, 
what  shall  be  done.     It  is  the  Actuary  who,  from  time  to  time 
— once  every  year,  at  least — informs  the  company  how  much 
"reserve  accumulation"  it  must  have  in  hand  to  meet  the  re- 
quirements of  law,  etc.,  etc.     A  State  Actuary,  or  the  Actu- 
ary of  The  Insurance  Department  of  a  state,  receives  his  ap- 
pointment  from   the   department,    and   his    services   are   em- 
ployed in  this  way:     When  a  Life  Insurance   company  de- 
sires to  do  business  in  a  state  in  which  it  has  not  been  oper- 
ating, it  makes  application  to  the  Insurance  Department  of 
that  state  for  admission.     If  it  be  the  custom  of  the  depart- 
ment to  decline  to  accept  the  valuation  certificate  of  the  com- 
pany's home  state  department,  it  is  then  required  to  send  to 
the  department  a  schedule  of  all  its  policies  in  force,  giving,  in 
detail,  the  age  of  every  policy-holder  when  insured;  also,  the 
date,  amount  and  kind  of  policy.    This  schedule  is  given  to  the 
Actuary  of  the  department,  who  is  required  "to  value,"  as  it 
is   called,    every   policy   described   therein,    according   to   the 
Table  of  Mortality  and  rate  of  interest  adopted  by  the  state  as 
its  standard  of  valuation.    The  valuing  of  a  policy  consists  in 
ascertaining  how  much  its  "reserve  accumulation"  must  be,  at 
a  certain  date — generally  December  31 — to  comply  with  the 
requisitions  of  law.     When   every  policy  is  thus  valued,  the 
different  amounts  thus  obtained  are  added  together,  and  the 
total  amount  constitutes  what  is  called  the  "policy  liability" 
of    the    company;    to    this    are    added    the    other    liabilities 
— admitted,   but   unpaid   death   claims,   matured   endowments 
unpaid,    etc.,    etc. — and    the    result    shows    the    "total    liabil- 
ity"   of   the    company.      Then    this   total  liability  is  critically 
compared   with  the  company's   "gross  assets."     If  the  results 
prove  satisfactory  to  the  department,  it  issues  a  license  to  the 
company  to  do  business  in  the  state.     If  at  any  time  the  Depart- 
ment of  Insurance  become  suspicious  that  any  Life  Insurance 
company  doing  business  in  the  state  is  not  sound,  it  can  demand 
another  examination  as  thorough  as  if  the  company  were  apply- 
ing for  admission  into  the  state  for  the  first  time.     The  policies 
of  all  home  companies  have  to  be  valued  every  year  by  the  State 
Actuary.    In  various  other  ways  the  services  of  a  competent 
actuary  are  made  very  useful  to  the  department  and  beneficial  to 
every  policy-holder  in  the  state. 

Assets. — All  the  available  funds  and  property  of  any  kind 
belonging  to  a  Life  Insurance  company.  These  are  closely  scru- 
tinized by  the  Insurance  Department  of  every  state.  Companies 
admitted  to  do  business  are  required  to  report  to  the  depart- 
ment early  each  year,  not  only  the  amount  of  assets  on  hand 


22  THE   THREE   SYSTEMS 

at  the  close  of  the  preceding  year,  but  also  the  minutest  de- 
tails of  the  same,  and  these  reports  must  be  sworn  to  by  at 
least  two  of  the  company's  officers. 

Brokerage. — A  percentage  paid  to  an  agent  or  solicitor,  by  a 
company,  on  the  first  year's  premiums,  only,  of  policies  obtained 
by  him,  in  lieu  of  future  commissions  on  renewal  premiums. 

Commissions. — A  percentage  paid  to  an  agent  or  solicitor 
on  all  premiums  of  policies  obtained  by  him,  for  a  specified  num- 
ber of  years. 

Company,  Insurance. — There  are  three  kinds  of  Life  In- 
surance companies:  STOCK  COMPANIES,  MUTUAL  COMPANIES,  and 
MIXED  COMPANIES. 

A  STOCK  COMPANY  has  for  its  basis  a  capital  stock.  The 
stockholders  elect  a  board  of  directors,  and  they  the  officers  who 
conduct  the  entire  business  of  the  company  under  the  direction 
and  supervision  of  the  board.  The  rates  charged  for  insurance 
are,  nominally,  Lower  than  in  the  other  companies.  Policy- 
holders  would  pay  less  in  a  stock  company  than  in  most  mutual 
or  mixed  companies,  for  the  first  few  years,  but,  as  all  the  margins 
and  profits  made  in  a  stock  company  go  to  the  stockholders,  there 
are  no  dividends  to  reduce  the  premiums,  so  that  after  having 
been  insured  for  fifty  years,  they  still  have  to  pay  the  same 
premiums  as  at  first,  where  the  policy  calls  for  continuous 
annual  premiums  throughout  life.  But  some  so-called  stock 
companies  are  really  mutual.  They  organize  on  the  basis  of 
a  nominal  capital  in  order  to  comply  with  the  law,  which,  in 
a  number  of  states,  forbids  the  organization  of  life  insurance 
companies  without  capital,  or  to  secure  to  the  stockholders 
the  control  of  the  business,  but  in  every  other  respect  they 
are  mutual  companies,  giving  all  the  profits  of  the  business, 
over  and  above  what  is  necessary  to  run  them,  to  the  policy- 
holders. 

A  MUTUAL  COMPANY  is  one  that  is  nominally  controlled  by 
the  policy-holders,  t7iemselves.     Every  policy-holder  has  the  right 
to  vote,  in  person  or  by  "proxy,"  in  the  election  of  a  board  of  di- 
rectors.    Many  of  the  largest  and  most  successful  Life  Insur- 
ance companies  on  the  globe  are  mutual  companies,  and  their 
policy-holders  have  always  had  the  right  to  vote  at  the  annual 
elections;  but  their  success  and  their  present  proud  positions 
in  the  insurance  world  are  owing  to  the  fact  that,  from  first  to 
last,  their  business  has  been  largely  controlled  by  a  few  men 
who  have  proved  themselves  equal  to  every  emergency  that 
has  arisen,  and  faithful  to  the  sacred  trusts  confided  to  them 
by  the   proxies   of  a   numerous,   intelligent   and   appreciative 
membership.     The   same   can   be   said   of   other   but  younger 
companies  that  are  rapidly  coming  to  the  front,  and,  juniors 
though  they  are  and  must  always  be,  they  even  now  claim 


OF  LIFE  INSURANCE.  23 

superiority  in  some  things  over  their  seniors.  In  a  strictly 
mutual  company  the  dividends  are  paid  to  its  policy-holders, 
from  whatever  sources  they  may  arise. 

A  MIXED  COMPANY  is  one  that  does  business,  nominally,  on 
both  the  stock  and  the  mutual  plans.  It  is  neither  a  purely 
mutual  company,  nor  a  strictly  stock  company.  It  is  based  on  a 
stock  capital,  and  therefore  the  policy  holders  have  nothing 
whatever  to  do  with  its  management,  although  there  are  some 
exceptions  to  this  rule  where  the  payment  of  a  certain  amount 
as  premium  annually  entitles  the  policy-holder  to  a  vote  in 
the  same  way  as  the  holder  of  a  share  of  stock.  Policy- 
holders  who  insure  on  the  stock  plan  receive  no  dividends; 
these  who  insure  on  the  mutual  plan  receive  dividends. 

Contribution  System  of  Dividends.— This  is  a  system 
by  which  the  surplus  of  a  company  is  distributed  among  its 
policy-holders,  from  year  to  year,  or  at  the  end  of  specified 
terms,  according  to  the  amount  that  each  one  of  them  has 
contributed  to  produce  it.  It  was  a  wonderful  discovery,  and 
its  authorship  is  conceded  to  two  eminent  American  Actu- 
aries, the  late  Sheppard  Homans  and  D.  Parks  Fackler,  the 
latter  being  now  a  Consulting  Actuary  for  several  of  the  lead- 
ing Life  Insurance  companies  of  the  United  States  and  Can- 
ada. The  merits  of  this  system  of  distributing  surplus  is 
shown  by  the  fact  that  all  the  Life  companies  in  the  United 
States — we  are  not  aware  of  a  single  exception — have  adopted 
it.  Before  its  discovery  a  policy-holder  that  had  been  insured 
in  a  company  twenty  years  received  no  larger  dividend,  other 
things  being  equal,  than  did  one  who  had  been  insured  but 
five  years.  By  this  system,  the  older  the  policy,  the  larger 
the  dividend.  A  policy-holder  whose  reserve  accumulation 
in  the  hands  of  the  company  is  $1,000  receives,  from  this 
source,  ten  times  the  amount  that  another  would  receive 
whose  reserve  accumulations  were  only  $100. 

Dividend. — For  a  full  explanation  of  CASH  DIVIDENDS, 
See  pages  .69-73.  "Reversionary  dividends,"  or  "re- 
versionary additions"  as  they  are  sometimes  called,  are  paid  up 
insurances  purchased  from  year  to  year  by  cash  dividends.  To 
illustrate  :  Suppose  one  is  insured  on  the  ordinary  Life  plan, 
in  a  "Level  Premium  Company,"  and  that  his  cash  dividend,  at 
the  end  of  the  first  year,  when  he  is  thirty  five  years  old,  is 
$38.54.  This  dividend  could  be  used  in  part  payment  of  the  pre- 
mium, just  due;  but,  instead,  he  applies  it  to  the  purchase  of  paid 
up  insurance.  It  would  purchase,  in  some  companies,  exactly 
$100  of  such  insurance,  payable  when  the  original  policy  is  pay- 
able—a^ death.  At  the  beginning  of  the  next  year  he  starts  off 
with  the  original  policy,  on  which  he  is  to  pay  premiums  every 
year  as  long  as  he  shall  live,  and  he  also  has  a  small  policy  of 


24  THE   THREE   SYSTEMS 

$100  upon  wJuch  he  will  never  have  to  pay  any  premiums,  and 
from  which  lie  will  receive  little  dividends,  probably,  every 
year.  Suppose  he  does  the  same  next  year,  and  that  his  cash 
dividend  is  then  $39.31.  He  is  now  36  years  old,  and  although 
the  dividend  is  a  little  larger  than  it  was  last  year,  he  is  one 
year  older,  and  it  will  purchase  only  $100  of  paid-up  insurance. 
The  rate  is  higher  at  36  than  at  35.  Suppose,  at  the  end  of  a 
policy  year,  when  his  nearest  age  is  55,  his  'cash  dividend  is 
$58.74.  Because  of  his  increased  age,  this  much  larger  dividend 
will  purchase  only$ioo  of  paid-up  insurance.  At  age7o,  it  would 
require  a  cash  dividend  of  $76.60  to  purchase  $100  of  paid  up 
insurance.  These  several  amounts  of  paid  up  insurance,  pur- 
chased by  the  cash  dividends,  are  called  "reversionary  addi- 
tions," or  "reversionary  dividends." 

Expectation  of  Life. — A  term  applied  to  the  mean  or 
average  duration  of  the  future  life  of  a  person,  at  any  age,  accord- 
ing to  a  given  table  of  mortality. 

Forfeiture. --The  violation  of  some  of  the  conditions  of  a 
policy,  which  gives  a  company  the  legal  right  to  cancel  its  policy 
contract  with  the  insured. 

Lapse. — See  Chapter  VII. 

Loading  —A  percentage  added  to  the  "net  premium"  for 
defraying  the  expenses  of  a  company  and  to  provide  for  a  possi- 
ble excess  of  mortality,  as  well  as  other  contingencies. 

Loss.— A  legal  claim  against  a  company  arising  from  the 
death  of  one  of  its  policy-holders.  Matured  Endowments  and 
policies  issued  on  Accumulative  Dividend  plans  which  reach 
the  end  of  their  dividend  periods,  strictly  speaking,  are  not 
losses,  although  they  form  legal  claims  against  the  company.- 

Mortality. — Having  a  given  number  of  persons  of  the  same 
age  living  at  the  beginning  of  a  year,  the  mortality  is  the  num- 
ber dying  during  that  year.  The  rate  of  mortality  is  the  ratio  of 
the  number  dying,  during  a  year,  to  the  number  that  were  living  at 
the  beginning  of  the  same  year. 


OF  LIFE  INSURANCE. 


CHAPTER  HI. 


POLICY.— SINGLE  PAYMENT  LIFE,  WITH  EXAMPLE.— FIVE-PAY- 
MENT LIFE,  WITH  EXAMPLE.— TEN-PAYMENT  LIFE,  WITH 
EXAMPLES  (1)  AND  (2).— FIFTEEN- PAYMENT  LIFE.— TWENTY 
PAYMENT  LIFE.— ORDINARY  LIFE,  WITH  EXAMPLE.— TERM 
LIFE. — RENEWABLE  TERM  LIFE. 

Policy.— A  contract  between  a  Life  Insurance  company  and 
one  of  its  policy  holders,  containing  the  terms  and  conditions  on 
which  the  former  indemnifies  the  beneficiary,  or  beneficiaries, 
named  therein,  against  financial  loss  in  the  event  of  the  death  of 
the  person  insured;  or,  by  which  the  company  agrees  to  pay  a  cer-, 
tain  sum  of  money  when  the  insured  shall  attain  a  certain  age, 
or  survives  a  certain  period.  It  is  not  possible  here  to  even 
name  the  different  kinds  of  policies  issued  by  the  companies 
doing  business  in  this  country.  The  following  are  the  most 
common  and  popular  forms: 

SINGLE- PAYMENT  LIFE. — This  is  a  policy  that  is  payable  at 
the  death  of  the  insured,  only.  All  the  premiums  are  paid  in  one, 
single  sum.  If  issued  on  the  Stock  plan,  no  dividends  ;  if  on  the 
Mutual  plan,  dividends  are  paid  by  the  company  to  the  insured 
every  year  during  life.  For  $1,000  of  insurance,  at  age  40,  the 
Stock  rate  is,  say,  $367.70  ;  Mutual  rate,  say,  $430.19. 

Example.— Policy  No.  28,342  ;  amount,  $10,000  ;  date  of  issue, 
April  8,  1863  ;  premium,  $4,077  ;  age,  38.  The  annual  cash  divi- 
dends were  used  to  purchase  additional  insurance.  When  tne 
policy  had  been  in  force  sixteen  years,  the  "  dividend  additions  " 
amounted  to  $6,020.  Had  he  died,  at  that  time,  his  estate  would 
have  received  $16,020.95. 

FIVE- ANNUAL  PAYMENT  LIFE. — This  policy  is  payable  at  the 
death  of  the  insured  only.  The  premiums  are  required  to  be  all 
paid  during  the  first  five  years.  If  issued  on  the  Stock  plan,  no 
dividends  ;  if  on  the  Mutual  plan,  dividends  are  paid  to  the  in- 
sured every  year  during  life.  For  $1,000  of  insurance,  at.  the  age 
of  40,  the  Stock  rate  is,  say  $75.87  annually  ;  Mutual  rate,  say 
$101.16  per  annum,  for  five  years  only. 

Example.— Policy  No.  32,247  ;  amount,  $10,000  ;  date  of  issue, 
June  4,  1864;  age,  39;  annual  premium,  for  five  years  only, 
$953-8o;  total  premiums  paid,  $4,769.  His  cash  dividends, 
during  the  first  fourteen  years,  amounted  to  $2,257.34.  After 
the  first  five  years  they  averaged  $100  per  annum.  The  cash 
dividends,  during  the  first  eight  years,  were  used  to  purchase 
additional  insurance.  From  the  eighth  to  the  fifteenth  year, 


26  THE   THREE   SYSTEMS 

inclusive,  he  gradually  converted  the  additions  from  former 
dividends  into  cash  and  used  it,  together  with  the  accruing 
cash  dividends,  in  payment  of  premiums  in  the  same  com- 
pany on  another  policy,  and  still  had  left  at  the  end  of  1878, 
additions  amounting  to  $334.  He  had  thus  paid  $2,296.23  in 
premiums  on  the  other  policy!  This  policy  can  never  be 
duplicated  even  by  the  company  'that  issued  it,  for  the  reason 
that  interest  earnings  are  much  less  now  than  in  the  period 
during  which  these  results  were  achieved. 

Ten- Annual  Payment  Life.— This  policy  is  payable  at 
the  death  of  the  insured  only.  All  the  premiums  are  required  to 
be  paid  during  the  first  ten  years.  If  issued  on  the  Stock  Plan, 
no  dividends;  if  on  the  Mutual  Plan,  dividends  are  paid  to  the 
insured,  every  year,  during  life.  For  $1,000  of  insurance,  at  age 
40,  the  Stock  rate  is,  say,  $47.43,  per  annum;  the  Mutual  rate  is, 
say,  $59.17,  per  annum. 

Example  1.— Policy  No.  17,114;  amount,  $4,OOO; 
date  of  issue,  August  6,  1856;  annual  premium  for 
ten  years,  only,  $189.92;  a#e,  31. 

The  record  of  this  policy  from  1856  to  1878,  inclusive — 
twenty-three  years — is  as  follows:  Total  premiums  paid  dur- 
ing the  first  ten  years,  $1,899.20.  The  cash  dividends  were 
all  used  to  purchase  additional  paid-up  insurance.  This  addi- 
tional insurance,  thus  purchased,  amounted  to  $2.990.20  at  the 
end  of  the  twenty-second  year!  Had  the  policy  then  become  a 
claim,  by  the  death  of  the  insured,  his  estate  would  have  re- 
ceived from  the  investment  $6,990.20.  He  had  paid  the  company 
less  than  $1,900.  These  results  can  probably  never  be  duplicated, 
as  the  period  from  1856  to  1878  was  an  exceptional  one  for  large 
dividends  in  all  the  companies,  owing  to  the  high  rates  of  interest 
received  on  their  reserves. 

Example  2.— Policy  No.  46,036;  amount,  $1,000;  date  of  issue, 
May  22d,  1869  ;  annual  premium,  for  ten  years,  only,  $52.72  ;  age, 
36.  The  history  of  this  policy,  from  1869  to  1885,  inclusive,— 
seventeen  years— , is  as  follows: 

Year.  Annual  Premiums.  Annual  Dividends        Net  Annual  Payments. 

1869  $52.72  $00.00  $52.72 

1870  52.72  00.00  52.72 

1871  52.72  4.24  48.48 

1872  52.72  6.49  46.23 

1873  52.72  8.91  43.81 

1874  52.72  12.05  40.67 

1875  52.72  14.63  38.09 

1876  52.72  17.32  35.40 

1877  52.72  19.79  32.93 

1878  52.72  22.34  30.38 

$527.20  $105.77  $421.43 


OF  LIFE  INSURANCE.  27 

Year.  Annual  Dividends. 

1879  $20.35 

1880  21.95 

1881  14.08  | -6 

1882  10.53  £.2 

1883  8.08  &•§• 

1884  8  16  §  £ 

1885  8.36  g  § 

o  * 

$91.51  fc 


Remark  1. — The  company  that  issued  this  policy  commences 
paying  dividends  at  the  end  of  the  second  policy  year,  when  the 
third  annual  premium  is  paid  ;  so  that,  in  the  above  policy,  only 
eight  dividends  were  available  in  payment  of  the  ten  premiums. 
These  eight  dividends  amount  to  $105.77,  and  had  they  been 
equally  distributed  and  used  in  paying  the  ten  premiums  instead 
of  eight,  the  net  gross  amount  paid  would  have  been  $421.48, 
as  shown  above.  Thus  it  is  seen  that  the  eight  dividends,  used 
as  they  were,  were  equivalent  to  a  twenty  per  cent,  reduction  of 
premium,  from  first  to  last. 

Remark  2. — Since  1878  this  policy  was  a  source  of  cash  in- 
come, dividends  to  the  amount  of  $91.51  having  been  paid  the 
insured.  The  dividend  of  1885  lacked  only  seven  cents  of 
being  two  per  cent,  of  the  entire  cost  of  the  policy. 

Remark  3.— The  cost  of  such  a  policy  in  a  Stock  Company, 
at  the  non-participating  rate  of  premium,  would  have  been 
$474.30,  or  thereabouts,  and  no  dividends! 

FIFTEEN- ANNUAL  PAYMENT  LIFE. — This  policy  is  made  pay- 
able only  on  the  death  of  the  insured.  All  the  premiums  must  be 
paid  during  the  first  fifteen  years.  If  issued  on  the  Stock  plan,  no 
dividends  ;  if  on  the  Mutual  plan,  cash  dividends  during  life. 
For  $1,000  of  insurance,  at  age  40,  the  Stock  rate  is,  say,  $35.05 
per  annum  ;  the  Mutual  rate  is,  say,  $45.29. 

TWENTY- ANNUAL  PAYMENT  LIFE. — This  policy  is  made  pay- 
able only  on  the  death  of  the  insured.  All  the  premiums  must  be 
paid  during  the  first  twenty  years.  If  issued  on  the  Stock  plan,  no 
dividends ;  if  on  the  Mutual  plan,  cash  dividends  during  life. 
For  $1,000  of  insurance,  at  age  40,  the  Stock  rate  is,  say,  $30.10  ; 
the  Mutual  rate  is,  say,  $38.65. 

ORDINARY  LIFE. — This  policy  is  made  payable  only  on  the 
death  of  the  insured.  Premiums  must  be  paid  during  life.  If 
issued  on  the  Stock  plan,  no  dividends  ;  if  on  the  Mutual  plan, 
cash  dividends  are  paid  every  year — after  the  first  or  second — so 
long  as  the  policy  remains  in  force.  For  $1,000  of  insurance,  at 
the  age  of  40,  the  Stock  rate  is.  say,  $24.35  ;  the  Mutual  rate  is, 
say,  $30.84.  The  rates  are  lower  at  younger,  and  higher  at  older, 
ages,  as  is  the  case  in  all  other  forms  of  policy  contract. 


THE  THREE  SYSTEMS 

Example.— Policy  ]STo.  55,904;  amount,  $2,000;  date,  1868;  an- 
nual premium,  $92.00;  age,  50.  The  insured  paid  fifteen  pre- 
miums amounting  to  $1,380,  which,  less  dividends  of  $401.32 
and  premium  loan  of  $288.68  (canceled),  made  a  net  payment 
or  cost  of  $690.00,  exclusive  of  interest.  He  did  not  pay  the 
premium  due  in  December,  1883;  but  instead  of  taking  a  paid- 
up  policy  for  $563.00,  he  allowed  his  insurance  to  be  extended 
for  4  years  and  117  days,  making  in  all  19  years  and  117  days' 
insurance,  at  an  average  yearly  cost  of  $17.85  per  thousand. 
The  party  insured  died  in  August,  1885,  more  than  one  year 
after  the  lapse  of  the  policy,  which,  however,  was  promptly 
paid  in  full  by  the  company. 

TERM -LIFE. — This  policy  is  made  payable  only  on  the  death 
of  the  insured  within  the  term  designated  in  the  contract.  The 
term  may  be  for  one,  ten  or  twenty  years.  The  policy  con- 
tract may  provide  for  renewal,  at  the  expiration  of  the  original 
term,  on  re-examination  of  the  insured,  and  at  advanced  rate 
of  premium,  or  not.  This  depends  upon  the  practice  of  the 
company  issuing  it.  A  Term  Life  Policy  is  generally  under- 
stood to  be  insurance  for  10  to  20  years,  with  uniform  annual 
premiums.  No  dividends;  no  paid-up  insurance;  no  cash 
surrender  value,  and  no  insurance  one  minute  after  the  desig- 
nated term  has  ended. 

RENEWABLE   TERM-LIFE. — Some   companies   issue   a   Re- 
newable Term  Life  policy,  as  follows:  Length  of  term,  ten  years, 
Uniform  annual,  semi-annual  or  quarterly  premiums  are  required 
to  be  paid  during  the  term.     The  policy  contract  is  renewable 
after  each  term  of  ten  years,  at  advanced  rate,  without  medical 
examination,  and  the   accumulated  dividends  of  the  last  pre- 
ceding ten  years,  if  any,  are  applied  to  a  uniform  reduction  of 
the  next  ten  years'  premiums.     Definite  provisions  are  made  for 
paid  up  or  cash  surrender  value,  if  desired,  after  the  first  three 
years.    The  following  are  specimen  annual  rates  for  $1,000  of 
insurance:     At  age  20,  $12.20;  at  25,  $13.90;  at  30,  $16.10;  at 
35,  $18.98;  at  40,  $22.81;  at  45,  $28.11;  at  50,  $35-28;  at  55,  $44-QO 
and  at  60,  $58.00.     The  rates  at  intermediate  ages  are  propor- 
tional. 

Several  companies  issue  a  Yearly  Renewable  Policy.  For 
$1,000  of  insurance,  at  age  40,  the  premium  the  first  year  is 
$14.69;  the  second  year,  $15.01;  the  third  year,  $15.38;  the 
fourth  year,  $15.78  and  so  on,  gradually  increasing  from  year 
to  year,  as  the  insured  becomes  older.  No  dividends,  no 
surrender  value  in  cash  or  paid-up  insurance. 


OF  LIFE  INSURANCE.  29 


CHAPTER  IV. 


ENDOWMENT  INSURANCE  —QUESTIONS  ASKED  AND  ANSWERED.— 
ASSUMED  EXAMPLES. — ACTUAL  EXAMPLES. 

ENDOWMENT  INSURANCE  POLICIES.— These  are  issued  in  two 
general  forms— (1),  Ordinary  Endowments  ;  (2),  Limited 
Payment  Endowments.  In  an  Ordinary  Endowment,  the 
policy  is  made  payable  to  the  insured  in  ten,  fifteen,  twenty, 
twenty-five,  thirty  or  thirty-five  years  after  the  date  thereof, 
or  on  attaining  a  specified  age  (usually  a  multiple  of  five,  as 
50,  55,  60,  etc.),  provided  he  be  then  living  to  receive  the 
money;  or,  to  his  estate,  or  some  beneficiary  named,  at  the 
death  of  the  insured,  should  it  sooner  occur.  Premiums 
must  be  paid  every  year,  less  the  dividends,  if  any,  during  the 
entire  endowment  period  selected. 

For  a  Limited  Payment  Endowment  the  conditions  of  Hie  con- 
tract are  precisely  the  same,  except  the  premiums  must  all  be  paid 
in  a  less  time  than  that  named  as  the  Endowment  period.  To 
illustrate  :  A  twenty-year  Endowment  may  be  paid  for  in  ten  or 
fifteen,  or  even  five  years  ;  or,  a  thirty-five  year  Endowment  may 
be  paid  for  in  thirty,  twenty-five,  twenty,  fifteen,  ten  or  five 
years;  or,  any  of  these  may  be  paid  for  in  one  single  premium. 

As  these  endowments,  in  OUT  best  companies,  have  proved  tf 
be  compound  interest  investments  combined  with  very  cheap 
insurance— the  insurance  in  some  cases  costing  nothing  at  all — we 
have  endeavored  to  make  prominent  these  excellent  character- 
istics in  the  following  questions  and  answers  : 

"What  is  Endowment  Insurance? 

It  is  Life  Insurance  for  a  limited  time,  usually  ten,  fifteen, 
twenty,  twenty  five,  thirty  or  thirty  five  years. 

It  is  something  like  Term  Insurance,  is  it  not? 

Yes,  but  in  some  respects  radically  different.  In  Term  Insur- 
ance the  policy  is  not  paid  unless  death  occurs  during  the  term. 

Isn't  the  policy  paid,  in  Endowment  Insurance,  if  death 
occurs  during  the  term  ? 

Yes,  or  it  is  paid  to  the  party  insured,  if  living,  at  the  end 
of  the  term,  which  is  not  the  case  in  Term  Insurance. 

Then,  in  Endowment  Insurance,  one  does  not  have  "to 
die  to  win,"  as  the  saying  is? 

That's  it  exactly.    In  Ordinary  Life  Insurance,  provided, 


30  THE  THREE  SYSTEMS 

always,  that  the  conditions  of  the  contract  are  complied  with, 
the  policy  becomes  a  claim  whenever  death  occurs.  In  Term 
Insurance,  death  must  occur  during  the  prescribed  term  or  there 
is  no  claim,  while  in  Endowment  Insurance,  the  policy  is 
paid  at  death,  during  the  term ;  or,  to  the  insured,  if  living,  at  the 
end  of  the  term. 

What  is  the  cost  of  an  Endowment,  in  comparison  with  other 
forms  of  Life  Insurance? 

It  is  considerably  higher. 

Why  is  it  higher? 

Because  Endowment  Insurance  is  Term  Insurance 
combined  with  a  compound  interest  investment.  To  illustrate  : 
We  assume  that  you  are  thirty-five  years  old,  that  you  are  insured 
under  a  twenty  year  Endowment  Contract,  for  $10,000— annual 
payment,  say,  $485.80.  By  one  of  the  conditions  of  the  contract, 
you  agree  to  pay  $485,8O,  every  year,  for  twenty  years, 
if  you  live  ;  but,  if  you  die  at  any  time  during  the  twenty  years, 
no  further  payments  are  required  after  date  of  death.  The 
Company  agrees  to  pay  you  $1O,OOO  if  living  to  re- 
ceive it  at  the  end  of  the  twenty  years  ;  or,  to  pay  your  legal 
representatives  $1O,OOO  soon  after  your  death,  if  it  occur 
within  the  twenty  years. 

Referring  to  Table  No.  12,  we  see  that  $256.50  per  year,  at  six 
per  cent,  compound  interest,  will  amount  to  exactly  $10,000 
in  twenty  years.  You  understand,  therefore,  that  if  you  live 
until  the  maturity  of  the  Endowment,  and  receive  the  $10,000 
from  the  company,  you  will  have  made  an  investment  of  $256.50 
per  year  and  actually  realized  six  per  cent,  compound  interest 
on  the  money  thus  invested,  for  the  time  it  was  with  the  com 
pany.  When  the  company  contracted  to  pay  the  $10,000  at  the 
time  and  under  the  conditions  specified  in  the  policy,  it  guaran- 
teed, absolutely,  just  such  an  investment  to  the  extent  of  $256.50 
per  year.  Nor  was  the  guaranty  alone  conditioned  upon  your 
living  and  paying  the  premiums  to  the  end  of  the  twenty  years  ; 
but,  in  the  event  of  your  death  at  any  date  during  the  twenty 
years,  all  the  conditions  of  the  contract  having  been  fulfilled  by 
you,  the  guaranty  was  that  as  much  money  should  be  paid  to 
your  representatives  as  you  would  have  realized  had  you  lived  to 
loan  out  $256.50  every  year  for  twenty  years,  at  six  per  cent,  com- 
pound interest. 

This  $256.50  of  the  Endowment  Premium  under  consideration, 
is  what  we  call  the  investment  element.  This  amount,  an- 
nually— or  a  larger  sum,  at  a  less  rate  of  interest— must  accumu 
late  with  the  company  at  six  per  cent,  compound  interest,  in 
order  that  the  company  may  meet  its  obligations  on  the  contract 
when  it  snail  have  matured. 

But  you  are  paying  the  Company  more  than  $256. 50  per  year, 
and  this  excess  is  the  cost  of  insurance.  We  assume  that  you  are 


OP  LIFE  INSURANCE.  31 

insured  in  a  dividend  paying  company,  and  that  you  are  using 
the  dividends,  from  year  to  year,  in  reduction  of  the  annual  pay- 
ment. Our  better  class  of  life  companies  have  been  paying  on 
this  kind  of  insurance,  the  last  20  years,  a  dividend  of  from  25 
to  40  per  cent,  per  annum,  as  an  average  for  the  whole  time. 
Suppose,  at  the  end  of  the  twenty  years,  your  dividends  have 
averaged  33%  per  cent,  of  the  annual  premium;  we  then  have  the 
following  results: 

Twenty- Year  Endowment  at  Agre  35: 

Gross  annual  premium  for  $10,000 $485  80 

*  Less  the  assumed  average  annual  dividend 161  93 


Net  annual  payment $323  87 

The  investment  element  returned  with  six 
per  cent,  compound  interest,  end  of  twenty 
years,  in  the  $10,000  paid  by  Company 256  50 

Annual  cost $67  37 

At  ages  thirty,  twenty-five,    or  twenty,  with  the  same  as- 
sumptions as  above,  the  results  would  be  as  follows: 

Twenty -Year  Endowment  at  Age  3O: 

Gross  annual  premium  for  $10,000 $471  10 

Less  the  assumed  average  annual  dividend 157  03 

Net  annual  payment $314  07 

The  investment  element  returned,  &c 256  50 


Annual  cost $57  57 

Twenty-Year  Endowment  at  Age  25: 

Gross  annual  premium  for  $10,000 $460  70 

Less  the  assumed  average  annual  dividend 153  57 

Net  annual  payment $307  13 

The  investment  element  returned,  &c 256  50 


Annual  cost $50  63 

Twenty- Year  Endowment  at  Age  2O: 

Gross  annual  premium  for  $10,000 $452  90 

Less  the  assumed  average  annual  dividend 150  97 

Net  annual  payment $301  93 

The  investment  element  returned,  &c 256  50 

Annual  cost $45  43 

Equally  satisfactory  results  can  be  shown  in  shorter  or  longer 
endowments.  Table  No.  12  gives  the  investment  elements  at 
certain  rates  of  interest.  In  a  ten-year  endowment,  for  example, 
the  annual  premium  for  $10,000  at  age  35,  is,  say,  $1,025.10.  De- 


32  THE  THREE  SYSTEMS 

duct  from  this  the  average  dividend  of  the  company,  and  from 
this  result  the  investment  element,  $715.70,  and  the  balance  shows 
the  cost  of  insurance  ;  and,  similarly,  with  endowments  running 
fifteen,  twenty-five,  thirty  or  thirty -five  years.  If  the  rate  of  in- 
terest assumed  in  our  illustrations — 6  per  cent. — seems  too  high, 
use  the  investment  elements  at  a  lower  rate,  as  shown  in  the  table. 

You  have  not  failed  to  notice  that,  while  the  Investment 
Element  in  the  foregoing  examples  is  the  same,  the  cost  of  in- 
surance varies  ;  it  is  $45.43  per  year,  for  the  youngest  age,  and 
$67.37  per  year,  for  the  oldest.  The  difference  in  age  does  not  af- 
fect the  Investment  Element,  provided  the  amount  and  kind 
of  Endowment  are  the  same.  But  the  cost  of  insurance  is  greater 
at  the  older  ages.  By  referring  to  Table  No.  18,*you  will  see 
why.  At  age  25,  less  than  seventeen  out  of  one  hundred  die  in 
twenty  years;  while  at  age  35,  the  death  rate  for  the  same  time  is 
twenty  one. 

A  little  further  on  will  be  found  some  examples  of  Matured 
Endowments.  These  should  be  carefully  examined.  Before  you 
do  this,  however,  we  desire  to  make  one  or  two  points  very 
clear.  If  successful  in  this  the  subject  of  endowments  will  be 
freed  from  many  vexatious  complications.  You  will  now  turn  to 
Table  No.  12.  Until  you  understand  this  table,  you  cannot 
comprehend  our  explanation  of  endowments.  With  the  table 
before  you,  look  for  16  in  the  year  column,  to  the  right  hand  of 
which,  in  the  column  headed  "  six  per  cent.,  you  will  find  $36.75. 
This  is  the  annual  investment,  which,  if  compounded  annually  at 
six  per  cent,  interest,  will  amount  to  exactly  $1,000  in  sixteen  j^ears. 
In  the  same  Fix  per  cent,  column,  at  the  right  hand  of  20,  may  be 
found  $25.65.  This  is  the  annual  investment,  which,  if  com- 
pounded annually  at  six  per  cent,  interest,  will  amount  to 
$1,000  in  twenty  years.  If  you  would  multiply  the  result,  you 
must  multiply  the  annual  investment.  Ten  times  either  of  the 
above  annual  investments  will  produce  ten  times  $1,000,  or 
$10,000.  In  a  similar  manner,  by  this  table,  you  can  tell  at  a 
glance  the  required  annual  investment,  which,  if  compounded 
annually  at  a  certain  rate  of  interest,  will  amount  to  $1,000,  or 
any  multiple  of  $1,000,  in  a  given  number  of  years  not  exceed- 
ing 50. 

At  age  40,  an  Ordinary  2O- Year  Endowment  Policy,  for 
$10,000,  requires  the  payment  of  twenty  annual  premiums  of 
$508.70,  each,  the  rate  varying  a  little  in  different  companies. 
For  convenience  of  illustration  we  divide  this  premium  into  two 
parts,  as  follows: 

1.  The  Investment  Element $256  50 

2.  The  Insurance  Element 252  20 


Gross  premium 508  70 

In  a  policy  like  the  above,  every  company  agrees  to  do  one  of 


OF  LIFE  INSURANCE.  33 

two  things,  provided,  always,  that  the  insured  fulfill  his  part  of 
the  policy  contract,  viz.  (1),  it  agrees  to  pay  to  the  insured 
$10,000  at  the  end  of  twenty  years,  provided  he  shall  then  be 
living  to  receive  it ;  or,  (2),  it  agrees  to  pay  to  somebody  else 
$10,000,  provided  the  insured  die  at  any  time  during  the  twenty 
years.  Let  it  be  assumed  that  such  a  policy  has  been  issued ; 
that  the  insured  has  lived  the  twenty  years,  and  that  he  has  re- 
ceived the  $10,000  as  stipulated  in  the  contract.  By  again  con- 
sulting Table  No.  12,  it  will  be  seen  that  when  the  company 
paid  the  $10,000  to  the  insured,  it  simply  returned  $256.50  of  every 
one  of  the  twenty  annual  premiums  paid,  together  with  six  per 
cent,  compound  interest  on  the  same,  for  the  entire  time  the 
money  was  in  its  hands  !!  It  is  a  six  per  cent,  compound 
interest  investment,  so  far  as  $256.50  of  the  gross  premium 
is  concerned.  And  this  was  guaranteed  by  the  company  from 
the  start,  because  it  required  precisely  such  an  investment  to 
produce  the  $10,000  which  the  company  agreed  to  pay.  Not  only 
this,  but  had  the  insured  died  at  any  time  after  the  payment  of 
the  first  annual  premium,  and  within  the  endowment  period,  the 
company  agreed  that  it  would  pay  to  somebody  as  much  as  would 
be  produced  by  such  an  investment.  Living  until  the  end  of 
the  twenty  years,  or  dying  during  the  twenty  years,  the  insured 
was  guaranteed,  in  the  policy  contract,  the  six  per  cent,  compound 
interest  investment  described!  We  have  now  disposed  of  the  in- 
vestment element  of  the  premium  ;  but  what  has  been  done 
with  the  insurance  element,  $252.20  ?  If  this  policy  were 
issued  by  one  of  our  best  mutual  companies,  the  average 
annual  cash  dividend,  during  the  twenty  years,  probably  equaled 
one-third  of  the  gross  premium.  The  gross  premium  is  $508.70, 
and  one-third  of  it  is  $169.57,  which  has  been  used  in  reducing 
the  insurance  element.  Taking  $169.57  from  $252.20,  leaves 
a  balance  of  $82.63,  the  average  annual  cost  of  the  insurance. 
A  splendid  investment !  Very  cheap  insurance.  This 
is  an  assumed  case,  but  you  will  see  that  the  assumed  are  not  as 
good  as  the  actual,  results  in  the  following  examples  of  ma- 
tured endowments. 

Example  1.— Policy  No.  6,O14  ;  amount,  $8,OOO  ; 
date  of  policy,  July,  1867  ;  kind  of  policy,  16-year 
endowment  requiring  sixteen  annual  payments  of 
$480.96,  each  ;  age  of  the  party  insured,  39  years. 

He  paid  sixteen  premiums  amounting  to $7,695  36 

Less  the  dividends 2,043  07 

Total  net  payments  in  sixteen  years 5,652  29 

Average  net  annual  payment 353  27 

The  annual  investment  which,  if  compounded 
annually,  at  six  per  cent,   interest,  will 

amount  to  $8,000  in  sixteen  years 294  00 

Net  annual  cost  of  the  insurance 59  27 


34  THE   THREE   SYSTEMS. 

This  endowment  matured  and  was  paid  July  1,  1883.  The 
investment  was  $294.00  per  year  for  sixteen  years.  He  realized 
six  percent,  compound  interest  on  it,  the  principal  and  interest 
amounting  to  $8,000. 

Example  2.— Policy  No.  52,988;  amount,  $5,OOO; 
date  of  Policy,  March  5,  187O;  kind  of  Policy,  Ten- 
Year  Endowment  requiring  ten  annual  payments  of 
$529.75,  each;  age  of  the  party  insured,  39  years. 

He  paid  ten  premiums,  amounting  to $5,297  50 

Less  the  dividends . .  1,593  35 

Total  net  payments  in  ten  years 3,704  15 

Average  net  annual  payment 370  42 

The  annual  investment,  which,  if  compounded 
annually,   at  six    per  cent,   interest,    will 

amount  to  $5,000  in  ten  years 357  85 

Net  annual  cost  of  the  insurance 12  57 

This  endowment  matured  and  was  paid  March  5,  1880.  The 
investment  was  $357.85  per  annum  for  ten  years.  He  realized 
six  per  cent,  compound  interest  on  it,  the  principal  and  interest 
amounting  to  $5.000. 

Example  3.— Policy  No.  37,589;  amount,  $4,OOO; 
date  of  policy,  March  26,  1866;  kind  of  policy,  15- 
year  endowment  requiring-  fifteen  annual  payments 
of  $3O2. 12  each;  age  of  the  party  insured,  4O  years. 

He  paid  fifteen  premiums,  amounting  to $4,531  80 

Less  the  dividends 1,656  55 

Total  net  payments  in  fifteen  years 2,875  25 

Average  net  annual  payment 191  68 

The  annual  investment,  which,  if  compounded 
annually,   at  six   per  cent,   interest,  will 

amount  to  $4,000  in  fifteen  years 162  12 

Net  annual  cost  of  the  insurance 29  56 

This  endowment  matured  and  was  paid  March  26,  1881.  The 
investment  was  $162.12  per  annum,  for  fifteen  years.  He 
realized  six  per  cent,  compound  interest  on  it,  the  principal  and 
interest  amounting  to  $4,000. 

Example  4.— Policy  No.  5,848;  amount,  $6,OOO; 
date  of  policy,  December  26,  1865;  kind  of  policy, 
18-year  Endowment  requiring  eighteen  annual  pay- 
ments of  $352.32,  each;  age  of  the  party  insured,  37 
years. 


OF  LIFE  INSURANCE.  35 

He  paid  eighteen  premiums,  amounting  to $6,341  76 

Less  the  dividends 2,527  18 

Total  net  payments  in  eighteen  years 3,814  58 

Average  net  annual  payment 21192 

The  annual  investment,  which,  if  compounded 
annually,   at  six  per  cent,   interest,  will 

amount  to  $6,000  in  eighteen  years 183  18 

Net  annual  cost  of  the  insurance 28  74 

This  endowment  matured  and  was  paid  December  26,  1883. 
The  investment  was  $183.18,  per  annum,  for  eighteen  years. 
He  realized  six  per  cent,  compound  interest  on  it,  the  principal 
and  interest  amounting  to  $6,000. 

Example  5.— -Policy  No.  2,541;  amount,  $1,OOO; 
date  of  policy,  November  13,  1862;  kind  of  policy, 
20-year  Endowment  requiring  twenty  annual  pay- 
ments of  $48.49,  each;  age  of  the  party  insured,  4O 
years. 

He  paid  twenty  premiums  amounting  to $969  80 

Less  the  dividends 358  93 

Total  net  payments  in  twenty  years '  610  87 

Average  net  annual  payment 30  54 

The  annual  investment,  which,  it  compounded 
annually,    at    six    per    cent,    interest,    will 

amount  to  $1,000  in  twenty  years 25  65 

Net  annual  cost  of  the  insurance 489 

This  endowment  matured  and  was  paid  November  13,  1882. 
rhe  investment  was  $25.65,  per  annum,  for  twenty  years. 
[I«j  realized  six  per  cent  compound  interest  on  it,  the  principal 
ind  interest  amounting  to  $1,000. 

In  the  foregoing  examples,  all  the  cash  dividends  were  used  in 
the  reduction  of  annual  premiums.  In  the  following  examples 
[he  dividends  were  used  in  the  purchase,  from  year  to  year,  of 
additions  to  the  policies,  payable  with  the  policies. 

Example  6.— Policy  No.  3O,777;  amount,  $1,OOO; 
late  of  policy,  February  1,  1868;  kind  01  policy,  13- 
year  Endowment,  requiring1  ten  annual  payments  of 
£85  5O,  each;  age  of  the  party  insured,  22  years. 

Total  amount  of  policy  and  additions  paid  to  the 

insured,  by  the  company,  February  1, 1881,  $1,282  78 

Cash  dividend  paid  him  February  1,  1881 34  97 

Cash  dividend  paid  him  February  1,  1882 26  15 

$1,343  90 


36  THE   THREE   SYSTEMS 

His  ten  premiums  improved  at  5%  per  cent, 
compound  interest  would  have  amounted 
at  date  of  settlement  to $1,349  38 

And  be  received  in  addition  life  insurance  for  thirteen  years. 

Example  7.— Policy  No.  45,352;  amount,  $1,OOO; 
date  of  policy,  April  28,  1869;  kind  of  policy,  1O- 
year  Endowment  requiring"  ten  annual  payments  of 
$96.41  each;  age  of  the  party  insured,  35  years. 

Total  amount  of  policy  and  additions  paid  to 

the  insured,  by  the  company,  April  28, 1879,  $1,218  88 
Cash  dividend  paid  him  April  28,  1880 42  86 

$1,261  74 

His  ten  premiums  improved  at  4J6  per  cent, 
compound  interest,  for  the  time,  would 
amount  to $1,264  36 

And  be  received  in  addition  life  insurance  for  ten  years. 

If  the  National  Banks  were  to  advertise  that,  upon 
depositing  with  them  $256.50  every  year,  for  twenty  years,  at  the 
end  of  the  20  years  the  deposits  would  be  returned,  with  six  per 
cent,  compound  interest,  amounting  to  $1O,OOO  for  every  de- 
positor, and  if  a  small  additional  sum  were  deposited  with 
each  $256.50,  they  would  pay,  in  the  event  of  the  death  of  a  de- 
positor, before  the  expiration  of  the  20  years,  the  whole  amount 
of  $10,000,  sixty  or  ninety  days  after  date  of  death,  what  a 
stampede  there  would  be  to  all  our  National  Banks; 
and  yet,  varying  the  figures  to  correspond  with  the  different  ages 
of  persons,  aad  classes  of  policies,  this  is  substantially  what  all 
the  better  class  of  life  companies  are  doing  every  day 
in  the  year  and  every  hour  in  the  day,  in  offering  these  endow 
ments  to  business  and  professional  men  and  capitalists. 

Semi-Endowment  Policies. — By  this  form  of  insurance 
the  face  value  of  the  policy  is  payable  if  the  insured  die  within 
a  certain  number  of  years  -  usually  ten,  fifteen  or  twenty — but  if 
alive  at  the  end  of  that  time,  then  only  one  half  of  the  amount, 
with  accumulations,  if  any,  will  be  paid  to  the  owner  of  the 
policy. 


OF  LIFE  INSUKANCE.  37 


CHAPTER  V. 


TONTINE  INSURANCE.— SEMI-TONTINE  INSURANCE.— EMERY  Mc- 
CLINTOCK'S  DESCRIPTION  OF  THEM.— SENATE   RESOLUTION 
No.  100,  OF  THE   OHIO  LEGISLATURE.— APPOINTMENT  OF  A 
COMMITTEE  OF  INVESTIGATION. — MEMBERS  OF  THE  COMMIT- 
TEE.— THEIR  REPORT  ON  TONTINES  AND  SEMI-TONTINES. — 
EXTRACTS    FROM    SWORN    TESTIMONY. — ACCUMULATIVE 
DIVIDEND. — DISTRIBUTION. — BONUS  POLICIES,  ETC. 

Tontine  and  Semi-Tontine  Policies.— The  first  tontine 
policies  were  issued  over  thirty  years  ago,  and  provided  for 
absolute  forfeiture.  Subsequently  the  principle  was  modified 
in  the  Semi-Tontine  form,  by  the  introduction  of  paid-up 
values,  after  three  years.  Present  contracts,  as  hereinafter 
explained,  contain  only  the  dividend  forfeiture  feature  of  the 
original  tontine.  The  following  explanation  of  the  Tontine 
and  Semi-Tontine  forms  of  policies  was  written  some  years 
ago  by  Emery  McClintock,  now  Actuary  of  the  Mutual  Life 
Insurance  Company  of  New  York,  and  is  so  clearly  stated 
that  we  gladly  insert  it  for  the  benefit  of  our  readers: 

Tontine  Policies  are  issued  on  any  usual  form,  the  same  as 
ordinary  policies,  such  as  ordinary  life,  limited  payment  life,  or  en- 
dowment policies.  They  are  issued  at  the  usual  rates  of  premium, 
and  the  only  difference  between  such  policies  and  ordinary  poli- 
cies lies  in  certain  peculiar  stipulations. 

The  first  stipulation  is  as  follows  : 

"No  dividend  shall  be  allowed  or  paid  upon  this  policy  until  the  person  whose 
life  is  insured  thereby  shall  survive  the  completion  of  its  tontine  dividend  period, 
and  unless  this  policy  shall  then  be  in  force." 

The  period  referred  to  is  either  ten,  fifteen,  or  twenty  years, 
according  to  the  choice  made  by  the  policy  holder  in  his  original 
application.  The  effect  of  this  stipulation  is  that  each  premium 
must  be  paid  in  full  in  cash,  during  the  tontine  period,  without 
being  reduced  by  dividends. 

The  second  stipulation  is: 

"Previous  to  the  completion  of  its  tontine  dividend  period,  this  policy  shall  have 
no  surrender  value  in  a  paid-up  policy  or  otherwise. 

The  effect  of  the  stipulations  above  quoted  is  to  produce  sav- 
ings to  the  Company,  first,  in  not  paying  out  dividends,  and  sec- 


38  THE   THREE   SYSTEMS 

ondly,  in  not  issuing  paid-up  policies  in  case  of  lapse.  The  value 
of  such  savings,  with  their  accumulations,  is  credited  to  the 
tontine  policies  which  complete  their  respective  periods. 

Semi-tontine  Policies  form  a  separate  variety,  being  like 
tontine  policies  as  regards  withholding  dividends,  but  enjoying 
the  same  privileges  as  ordinary  policies  in  case  of  lapse,  as  regards 
paid-up  insurance. 

How  THE  SURPLUS  is  ASCERTAINED. — An  account  is  kept 
by  the  Company  from  year  to  year  of  the  special  savings  derived, 
as  above  explained,  from  tontine  policies  ;  and  a  separate  account 
is  kept  for  s:  mi-tontine  policies.  To  keep  in  view  the  equitable 
rights  of  each  tontine  and  semi-tontine  policy,  a  provisional  ac- 
count or  memorandum  of  its  contributions  to  the  undivided  sur- 
plus is  kept,  including  its  share  of  special  tontine  profits,  adding 
interest  from  year  to  year  at  the  current  rate  used  in  the  ordinary 
dividend  calculations.  The  memorandum  thus  kept  of  each 
policy  is  subject  to  future  rectification,  and  is  not  in  the  nature  of 
a  deposit  account,  nor  does  it  create  any  liability,  technically 
speaking,  different  from  the  usual  duty  of  every  company  to  dis. 
tribute  in  due  time  its  undivided  surplus  on  equitable  principles. 
The  sum  of  all  these  memorandum  accounts  shows  the  total  ton- 
tine surplus  of  the  Company.  The  accounts  for  each  calendar 
year  cannot  be  made  up  until  sixty  days  after  December  31st, 
owing  to  the  conditional  right  possessed  by  the  holders  of  lapsed 
tontine  policies  to  restore  them  within  that  time.  By  the  end  of 
March  in  each  year,  the  tontine  accounts  of  the  previous  year  can 
be  completed.  Any  member,  who  has  been  insured  three  years, 
who  wishes  to  learn  the  present  condition  of  the  memorandum 
account  kept  in  his  own  case,  can  do  so  by  addressing  the  Com- 
pany. A  fuller  description  of  the  method  of  keeping  the  tontine 
accounts  will  be  supplied  to  any  member  on  request. 

WHAT  MAY  BE  DONE  WITH  THE  SURPLUS. — The  holder  of  a 
tontine  or  semi-tontine  policy  may,  at  the  end  of  his  tontine  pe- 
riod, presuming  that  he  wishes  to  keep  his  policy  in  force,  employ 
the  accumulated  surplus  which  may  then  be  at  his  disposal  in  one 
of  three  ways: 

1st.     He  can  withdraw  it  in  cash. 

2d.  He  can  employ  its  value  in  reducing  the  amount  of  the 
future  annual  premium  payable.  If  his  policy  is  an  ordinary  life 
policy,  this  is  equivalent  to  purchasing  an  annuity  for  life  equal 
to  the  amount  by  which  the  annual  premium  is  reduced.  The 
annuity  is  calculated  for  a  larger  annual  amount  than  the  mere  in- 
terest on  the  money,  but  on  the  understanding  that  the  Company 
is  in  no  case  to  refund  any  part  of  it,  except  as  stated,  towards 
payment  of  premiums.  Such  an  annuity  will  possess  at  all  times 
an  equitable  value,  and  it  is  provided  that  in  any  year  in  which 
the  premium  so  reduced  is  not  paid  in  cash,  the  value  of  the  an' 
nuity  shall  be  drawn  upon  towards  meeting  it,  so  as  to  keep  the 


OF  LIFE   INSURANCE.  39 

policy  in  force.     (Of  course,  the  effect  of  this  would  be  to  make 
the  subsequent  premiums  each  proportionately  larger.) 

3d.  He  can,  on  furnishing  satisfactory  proof  of  good  health, 
purchase  with  the  surplus  a  non-forfeitable  participating  paid-up 
addition  to  his  policy. 

Endowments  maturing  at  the  end  of  the  tontine  period  cannot 
be  continued  in  force,  but  are  simply  paid  off  when  due,  with 
accumulated  surplus. 

OPTION  OF  SURRENDER  AT  END  OF  PERIOD. — If,  at  the  end 
of  the  tontine  period,  the  insured  prefers  to  discontinue  his 
policy,  he  can  surrender  it,  either  for  cash  or  for  paid-up  insu- 
rance, according  to  his  option.  (If  the  paid-up  policy  exceeds 
the  original  amount,  proof  of  good  health  will  be  required.)  If 
he  takes  the  ca^h,  the  Company  pays  him  not  only  the  accumu 
lated  surplus,  but  also  the  entire  reserve  held  on  the  policy,  aris- 
ing out  of  his  past  payments.  The  amount  of  reserve  which  will 
be  held  and  paid  is  inserted  in  the  policy,  but  no  stipulation  is 
possible,  of  course,  concerning  the  amount  of  the  surplus  which 
is  to  accumulate,  nor  does  the  Cdmpany  undertake  to  make  in 
advance  any  prediction  concerning  its  probable  amount. 

This  option  of  surrender,  which  gives  the  insured  the  benefit 
of  every  dollar  in  the  Company's  hands  in  any  wa"y  pertaining  to 
his  policy,  in  case  he  wishes  to  discontinue,  forms  the  most 
valuable  feature  of  the  tontine  and  semi-tontine  plans  of  life  in- 
surance. On  no  other  system  is  so  sweeping  a  privilege  obtaina- 
ble. The  more  this  point  is  reflected  upon,  the  greater  the  advan- 
tage appears  which  it  confers.  It  is  to  be  exercised  many  years 
in  the  future,  and  such  far  distant  subjects  usually  attract  little 
thought,  but  on  each  such  policy  the  time  will  come  when  this 
privilege,  inserted  at  the  beginning  in  the  contract,  will  be  found 
of  the  utmost  importance.  No  one  can  now  foretell  his  situation 
twenty  years  hence.  He  may  need  insurance  then  more  than 
ever,  or  he  may  have  no  use  for  it  at  all.  With  this  privilege,  he 
finds  himself  on  the  one  hand  just  as  well  off  as  if  he  had  origin- 
ally taken  the  policy  for  a  longer  term,  and  on  the  other  hand,  as 
if  he  had  chosen  an  endowment  maturing  at  the  time.  The  ton- 
tine or  semi-tontine  policy  combines  the  advantages  of  the  life 
policy  and  the  endowment,  being  adapted  at  all  points  to  the  con- 
tingencies of  the  future. 

THE  CHEAPEST  FORM  OF  INSURANCE. — Where  a  tontine  or 
semi-tontine  policy  is  surrendered  at  the  end  of  the  period  and 
the  cash  value  taken,  and  the  holder  compares  his  payments  with 
the  sum  returned  to  him,  whatever  the  latter  may  be,  he  finds  the 
net  cost  much  less  than  he  would  have  had  to  pay  for  the  same 
insurance  in  the  same  company  on  any  other  plan.  This  is  obvi- 
ous on  the  surface  ;  for  he  receives  on  surrender  all  the  surplus, 
with  interest,  which  would  have  been  paid  as  dividends  on  the 
policy  had  it  not  been  on  the  tontine  plan,  and  also  his  share  of 


40  THE  THREE  SYSTEMS 

the  surplus,  with  Interest,  which  would  have  been  paid  on  the 
policies  of  members  who  have  died  or  discontinued . 

Tontine  insurance,  more  than  any  other  system  ever  devised, 
EQUALIZES  the  benefits  of  life  insurance,  The  heirs  of  those  who 
die  early  get  a  large  return  in  any  event,  even  without  dividends ; 
while  those  who  pay  the  longest,  and  have  the  premium  paying 
burden  of  the  whole  period,  receive  all  the  dividends. 

Since  the  results  of  tontine  policies  are  more  advantageous 
pecuniarily  than  on  any  other  class  of  policies  in  the  same  com- 
pany, the  only  question  remaining  for  those  who  are  satisfied  of 
the  benefits  of  the  plan  is,  to  choose  that  company  which  will 
afford  him  the  best  return  for  his  money. 

During  the  years  immediately  following  the  introduction 
of  the  tontine  system,  life  insurance  in  the  United  States 
passed  through  a  highly  crucial  period.  The  panic  of  1873, 
caused  by  the  inflation  of  values  following  on  the  close  of  the 
Civil  War,  was  most  disastrous  to  life  insurance  companies, 
and  more  than  half  of  those  in  existence  in  1870  disappeared 
in  the  ensuing  decade.  The  surviving  companies  found  great 
difficulty  in  securing  new  business,  and  with  scarcely  an  ex- 
ception showed  a  decrease  in  insurance  in  force  each  year  up 
to  the  close  of  1878.  About  that  time  the  earliest  tontines 
commenced  to  mature,  and  great  disappointment  began  to  be 
expressed  at  the  results,  as  compared  with  the  estimates.  The 
companies  issuing  these  contracts  were  not  to  blame  for  the 
outcome.  They  had  prepared  estimates  based  on  past  ex- 
perience, submitted  them  to  competent  independent  actuarial 
authorities,  and  in  their  conservatism  had  still  further  reduced 
them  before  submitting  the  figures  to  the  public.  But  the 
ten  years  of  panic  and  distrust  of  life  insurance  generally,  en- 
tirely upset  the  calculations  based  on  past  experience.  In- 
terest rates  had  suffered  a  material  decline,  and  the  very  item 
which  had  been  relied  upon  to  produce  the  largest  source  of 
profit,  i.  e.,  lapses,  failed  to  come  anywhere  near  expectations. 
Experience  showed  that  the  fear  of  absolute  forfeiture  caused 
tontine  policies  to  lapse  in  smaller  ratio  than  other  kinds.  As 
the  tontine  contracts  matured  in  increasing  numbers  from 
year  to  year,  the  agitation  grew,  and  when  the  fifteen-year 
contracts  reached  the  end  of  their  period  and  repeated  the 
experience  of  the  ten-year  policies,  legislatures  were  appealed 
to  and  the  state  of  Ohio  made  an  investigation  into  the  sub- 
ject under  the  following: 


SENATE    RESOLUTION   NO.    1OO. 


"  Be  it  resolved,  That  the  Insurance  Commissioner  of  Ohio  is 
hereby  authorized  and  required,  with  three  members  (of  this  Sen- 
ateX  to  be  aDDointed  bv  the  President  of  the  Senate,  to  proceed 


OF  LIFE  INSURANCE  41 

at  once  to  the  states  where  such  Tontine  insurance  companies  are 
located  and  doing  business  in  Ohio,  and  examine  into  and  report 
to  this  Senate,  if  in  session,  and  if  not  in  session,  to  the  Insur- 
ance Department  of  Ohio,  upon  the  matters  relating  to  such  com 
panics,  as  hereinafter  set  forth.  Said  Committee,  consisting  of 
said  Insurance  Commissioner  and  Senators  so  appointed,  shall 
have  authority  to  procure  such  special  assistant  as  shall  be 
deemed  advisable  by  them  to  carry  out  the  provisions  of  this 
resolution." 

The  above  resolution  was  adopted  in  the  Ohio  Senate,  April 
15,  1885.  The  matters  about  which  investigation  was  to  be  made 
were  as  follows: 

" First — Specially  as  to  the  amount  of  insurance  issued  to  the 
citizens  of  Ohio  upon  the  Tontine  plan. 

" Second—  As  to  the  amount  of  such  Tontine  fund  placed  to 
the  credit  of  such  policies. 

"T/ard—As  to  the  mode  of  keeping  the  Tontine  accounts  with 
all  the  policy-holders,  and  whether  such  fund,  or  any  part  thereof, 
can  be  appropriated  by  the  officers  of  such  companies  for  any 
purpose  other  than  the  purpose  originally  intended,  and  whether 
such  fund  or  any  part  thereof  has  been  so  appropriated  or  in 
any  manner  misapplied;  and  generally  as  to  the  plans  and  methods 
of  doing  business  by  such  companies  both  at  the  home  office  and 
in  Ohio  through  agencies. 

"Fourth— As  to  the  credits  of  such  companies  upon  policies 
of  insurance,  to  be  obtained,  for  the  purpose  of  establishing  a 
basis  for  taxation  in  Ohio/' 

The  committee  appointed  under  the  foregoing  resolution  were 
as  follows:  Hon.  Henry  J.  Reinmund,  Superintendent  of  Insur- 
ance; Hon.  S.  P.  Wolcott,  Senator;  Hon.  Elmer  White,  Senator; 
Hon.  A.  C.  Cable,  Senator.  Mr.  Sheppard  Homans,  of  New 
York,  was  appointed  Special  Assistant  to  the  Committee. 

The  committee  met  at  the  office  of  the  Equitable  Life  Assur- 
ance Society  of  the  United  States,  at  the  company's  building,  120 
Broadway,  New  York,  May  29,  1885,  and  during  their  investiga- 
tions they  examined  the  following  companies,  designated  in  their 
report  as 

TABLE   NO.    1. 


Tontine  Companies  doing  business  in  Ohio 


Designation  of  Policies. 


1.— ^Etna,  Hartford,  Conn 

2.— Equitable,  New  York,  N.  Y. . . . 

3.— Home,  Brooklyn,  N.  Y 

4.— Metropolitan,  New  York,  N.  Y. 
5.— Michigan  Mutual,  Detroit,  Mich. 


-Mutual,  New  York,  N.  Y. 


7.— New  York,  New  York,  N.  Y.. . . 


Tontine. 
-North- Western  Mutual,  Milwau- ' 


kee,  Wis. 
-Penn  Mutual,  Phila.,  Pa. 


10.— Union  Mutual,  Portland,  Me. . . 
11.— United  States,  New  York,  N.  Y. 


Terminable  Endowments. 
Tontine  and  Semi-Tontinec 
Life-Rate  Endowments, 
Reserve  Endowments. 
Life -Rate  Endowments. 
Five-year  Distribution. 
Tontine  and  non-forfeiture 


Tontine  and  Semi-Tontine. 
Life-Rate  Endowment. 
Life-Rate  Endowment. 
Tontine  and  Semi-Tontine. 


"NOTE. — In  the  Tontine  list  are  included  all  those  companies 
in  which  surplus  is  accumulated  for  a  number  of  years  for  the 

•!_/»,/»•.  •* 


42  THE  THREE   SYSTEMS 

After  finishing  their  labors  two  reports  were  made:  one  by  the 
three  senators,  dated  Columbus,  Ohio,  August  19,  1885;  the  other 
by  Henry  W.  Reinmund,  Superintendent  of  Insurance,  and  Shep- 
pard  Homans,  Actuary,  assistant  to  Committee,  dated  Columbus, 
Ohio,  August  21,  1885.  These  two  reports  agree  substantially, 
on  all  points  of  vital  importance,  and,  as  the  latter  is  more  full, 
in  some  respects,  we  give  it  preference,  not  having  the  space  for 
both.  It  is  as  follows: 

"  The  undersigned,  while  coinciding  in  the  main  with  the 
views  so  well  expressed  by  the  Ohio  Senators  in  the  foregoing 
report,  feel  that  in  addition  a  resume  or  digest  of  the  evidence 
obtained  by  the  committee  is  desirable,  for  the  information  of  the 
public.  We  bear  cheerful  testimony  to  the  zeal  and  impartiality 
of  the  Senators,  in  securing  information  upon  the  important  sub- 
ject confided  to  us  by  the  Legislature.  The  committee  sought, 
and  obtained,  wherever  practicable,  testimony  from  the  oppo- 
nents as  well  as  from  the  advocates  of  Tontine  insurance,  with 
the  view  of  separating  that  which  was  the  result  of  careful  inves- 
tigation and  accurate  knowledge,  from  that  which  may  properly 
be  attributed  to  mere  sentiment,  or  in  some  few  cases  to  igno- 
rance or  malice.  The  criticisms  made  by  the  opponents  of  the 
Tontine  system  of  Life  Insurance  are  mainly  as  follows: 

(1.)    That  it  is  a  gambling  scheme. 

(2.)  That  by  harsh  penalties  in  case  of  forfeiture  it 'tends  to 
deprive  families  of  the  protection  which  they  otherwise  would 
have  obtained  under  ordinary  policies. 

(3.)    That  the  expenses  are  greater  in  Tontine  companies. 

(4.)  That  the  accounts  with  Tontine  policy-holders  are  im- 
perfectly kept,  and  that  the  funds  may  be.  misappropriated. 

(1.)  As  regards  the  charge  that  Tontine  Insurance  is  a  gam- 
bling scheme. — Gambling,  as  usually  understood,  is  a  scheme  by 
which  one  gets  something  for  nothing — where  no  valuable  con- 
sideration is  given  by  the  winner  to  the  loser — where  the  gain  to 
one  is  precisely  offset  by  the  loss  to  the  other — and  where  the 
gain  or  loss  depends  not  on  the  will  or  power  of  either  party,  but 
rather  upon  mere  chance  or  skill.  It  is  usually  condemned  as  a 
vice,  as  subversive  of  public  morals,  as  wicked  and  unlawful. 
Nothing  in  the  evidence  obtained  by  the  committee  shows  or  even 
tends  to  show,  that  such  grave  charges  can  justly  be  brought 
against  Tontine  Life  Insurance.  On  the  contrary,  the  evidence 
clearly  proves  that  Tontine  Companies  derive  solid  advantages 
from  Tontine  contracts,  and  can  safely  promise,  and  in  fact  do 
give  great  and  solid  benefit  to  Tontine  policy-holders.  Statistics 
abundantly  prove,  for  instance,  that  when  applicants  for  insur- 
ance deliberately  elect  to  pay  larger  premiums  than  are  absolutely 
necessary,  as  Tontine  policy-holders  do  when  they  elect  to  for- 
bear the  usual  yearly  dividends,  they  thereby  give  evidence,  un- 
consciously perhaps,  or  by  instinct,  that  they  expect  to  live  to 
enjoy  the  benefits  promised  in  case  of  long  life — in  other  words, 
they  give  evidence  of  superior  vitality,  which  is  more  reliable  in 
determining  the  value  of  the  risk  than  the  most  skillful  medical 
examination.  It  is  clearly  proven  that  the  rates  of  mortality, 
and  also  the  rates  of  lapses,"  or  discontinuances,  are  far  less  among 
Tontine  than  among  non-Tontine  policy-holders.  These  consti- 
tute the  solid  advantages  of  Tontine  contracts,  and  the  companies 


OF  LIFE  INSUKANCE.  43 

can  give,  and  in  fact  do  give,  in  return,  ample  and  compensating 
advantages  in  the  way  of  larger  dividends  or  surplus  and  larger 
surrender  values  than  can  be  safely  promised  or  given  under  or- 
dinary policies. 

Tontine  and  ordinary  policies  are  precisely  similar  as  regards 
the  rates  of  premium  charged,  as  regards  the  covenant  by  the 
company  to  pay  in  full  the  sum  insured,  and  as  regards  the  non- 
payment of  any  surrender  value  until  two  or  three  years  have 
elapsed.  They  differ  only  in  the  following  respects:  Under  a  full 
Tontine  contract  the  right  is  waived  (for  valuable  consideration) 
to  any  surrender  value  or  to  any  dividend  of  surplus  until  the  end 
of  the  Tontine  periods  elected.  Under  a  non-forfeiting  limited, 
or  semi-Tontine  contract,  the  same  right  to  a  surrender  value  is 
given  that  attaches  to  an  ordinary  policy,  but  the  right  is  waived 
(for  valuable  consideration)  to  any  dividend  of  surplus  until  the 
end  of  the  Tontine  period  selected.  In  other  words,  these  con- 
tracts differ  only  in  the  amount  of  the  penalty  exacted  in  case  of 
discontinuance  and  in  the  periods  agreed  upon  for  distrbutions 
of  surplus  among  policy-holders. 

No  Life  Insurance  Company  could,  without  endangering  its 
safety,  permit  policy-holders  to  withdraw  at  will,  in  cash,  their 
full  reserves,  or  even  a  large  fraction  thereof,  in  case  of  sur 
render,  because  in  case  of  a  panic,  for  instance,  resulting  from 
losses  in  investments  or  from  excessive  mortality  during  an  epi- 
demic, the  sound  lives  might  withdraw,  and  only  the  impaired 
lives  might  remain.  Without  proper  penalties  to  prevent  sound 
lives  from  withdrawing,  Life  Insurance  would  be  unsafe,  and  in 
fact  impossible. 

Penalties  for  the  non-performance  of  contracts  are  essential  to 
the  well  being  and  security  of  society  itself,  and  are  by  no 
means  confined  to  Life  Insurance.  The  company  is  bound  by 
the  strict  letter  of  the  policy  contract.  It  cannot  refuse  to  re- 
ceive a  premium,  even  if  the  person  insured  were  on  the  brink 
of  the  grave.  The  policy-holder,  on  the  contrary,  may  discon- 
tinue at  will,  and  usually  the  performance  or  non-performance  on 
his  part  of  the  conditions  of  his  contract  depends  upon  his  own 
volition.  The  penalty  for  discontinuance  is  greater  upon  Ton- 
tine than  it  is  upon  non-Tontine  contracts,  but  the  companies 
claim  that  in  the  former  case  the  increased  penalty  is  amply 
offset  by  increased  benefits.  The  difference  is  one  of  degree,  not 
of  kind.  The  principle  is  the  same  in  both  cases. 

A  Tontine  policy-holder  is  somewhat  like  a  special  partner  put- 
ting caj  italinto  a  mercantile  business  for  a  term  of  years.  He 
would  not  be  allowed  to  withdraw  his  capital  at  will — that  might 
ruin  the  business — but  at  the  end  of  the  partnership  period  he 
would  have  the  right  to  withdraw  his  entire  capital  and  his  full 
share  of  profits.  A  Life  Insurance  Company  could  not  permit  a 
policy  holder  to  withdraw  his  full  reserve  at  will,  but  by  reason 
of  the  superior  quality  of  Tontine  risks,  and  as  a  proper  compen 
sat  ion  therefor,  it  can  safely  promise  to  pay  in  cash  at  the  end  of 
a  long  period,  or  periods  named,  in  advance,  the  full  reserve,  in 
addition  to  the  full  share  of  surplus,  in  case  of  surrender.  In 
other  words,  a  Tontine  policy-holder  has  the  right,  at  stated 
times,  to  give  up  his  insurance  and  withdraw  his  full  equity  in 
cash.  This  great  advantage  could  not  safely  be  promised  under 
ordinary  policies. 

No  complaints  have  been  made  by  b  Dneflciaries  under  death 
claims  of  forfeiture  penalties,  and  but  few  from  those  who  have 
completed  their  Tontine  periods.  In  cases  of  early  deaths  the 
in  vestments  have  yielded  many  hundred,  perhaps  several  thousand 
per  cent.  Incase  of  long  life  and  performance  of  the  conditions 


44  THE   THREE   SYSTEMS 

of  the  contract,  the  investment  will  yield  far  more  under  a  Ton- 
tine than  under  an  ordinary  contract.  It  is  claimed  by  the  advo- 
cates of  Tontine  Insurance,  that  the  benefits  as  between  the  lon^- 
lived  and  the  shortlived  are  thus  equalized.  Only  those  persons 
who  break  their  contracts  feel  aggrieved  by  the  heavy  penalties. 
To  such  it  has  been  unfortunate,  and  the  losses  in  many  cases 
must  have  been  heavy.  There  is  no  evidence,  however,  that 
there  was  any  concealment  by  the  company,  or  that  the  contract 
was  not  voluntary  on  the  part  of  the  applicant,  or  that  he  did  not 
understand  fully  the  penalties  for  non-performance  as  well  as  the 
benefits  which  might  be  expected  from  the  performance  of  his 
contract.  The  applicant  was  left  to  select  that  form  of  insurance 
which  he  considered  the  best  suited  to  his  needs  or  his  pocket. 
This  is  just  as  it  should  be.  If  an  applicant  has  not  confidence 
in  his  ability  to  keep  up  his  premium  payments,  ordinary  business 
prudence  would  impel  him  to  select  a  semi-Tontine  or  an  ordinary 
policy.  If  his  object  is  simply  to  protect  his  family  at  the  lowest 
outlay  consistent  with  security,  he  may  choose  renewable  term 
insurance  where  the  investment  element  is  eliminated.  But  as 
the  senators  well  observed,  he  should  not  be  deprived  of  his  right 
to  make  his  own  selection. 

It  may  be  added  that  Tontine  Insurance  is  allowed  and  prac- 
ticed in  every  state  in  the  Union,  while  in  some  states — notably 
in  New  York— the  essential  conditions  of  that  form  of  contract 
are  sanctioned  by  distinct  legislative  enactments. 

(2). — As  regards  the  charge  that  Tontine  contracts  tend  to  de 
prive  families  of  the  protection  which  they  otherwise  would  have 
obtained  under  ordinary  policies. — The  whole  testimony  obtained 
by  the  committee  disproves  this  charge.  The  rates  of  discontinu- 
ances, except  in  the  first  two  or  three  years  when  the  conditions 
of  the  two  contracts  are  similar,  are  far  less  among  Tontine  than 
among  non-Tontine  policies,  and  this  is  easily  accounted  for. 
The  penalty  in  case  of  lapse,  and  the  reward  in  case  of  persist- 
ence, are  both  greater.  The  definite  promise  to  pay  a  large  sum 
in  cash  at  the  end  of  the  Tontine  period,  as  surplus  and  guaran- 
teed surrender  value,  furnishes  a  substantial  collateral,  available, 
if  necessary,  to  borrow  money  to  pay  premiums,  and  would  thus 
enable  a  Tontine  policy-holder  to  keep  up  his  insurance  when  an 
ordinary  policy  holder  would  be  compelled  to  lapse,  or  to  accept, 
(as  a  Semi-Tontine  policy-holder  might  also  do)  a  small  paid-up 
insurance.  Human  nature  is  so  weak  that  it  often  neglects  duties 
which  arc  for  our  own  interest  or  benefit,  unless  there  is  a  penalty 
for  the  non -performance,  or  a  reward  for  the  performance  of  the 
same. 

(3.). — As  regards  the  charge  that  expenses  are  greater  in  Ton- 
tine Companies. — Here,  again,  the  evidence  and  statistical  in- 
formation disprove  the  charge.  The  heaviest  expenses  are  gen 
erally  those  incurred  at  the  time  the  policy  is  issued,  and  the 
greater  the  volume  of  new  business  the  greater  the  apparent  ex- 
penses. The  Tontine  Companies  issued  seventy-four  per  cent, 
of  the  new  insurances  in  1884,  but  their  expenses  are  actually 
smaller  than  those  of  the  non-Tontine  Companies  when  com- 
pared to  new  business,  or  to  insurances  in  force  when  properly 
classified. 

(4.). — As  regards  the  methods  of  keeping  the  accounts,  and  the 
proper  application  of  the  funds. — No  evidence  of  wrong  doing 
has  been  offered  to  the  committee,  or  that  the  funds  properly  be- 
longing to  Tontine  policy-holders  are  not  managed  with  fidelity 
and  integrity,  and  are  not  held  intact  for  the  benefit  of  the  proper 
beneficiaries.  In  fact,  no  charge  or  complaint  of  this  nature  has 
been  made  or  is  known  to  the  committee  as  having  been  made 


OP  LIFE  INSURANCE.  45 

against  any  company.  In  conclusion,  the  evidence  obtained  by 
the  committee  demonstrates  that  the  Tontine  system  of  Life  In- 
surance is  lawful  ;  that  while  the  penalties  exacted  in  case  of  dis- 
continuance are  greater  than  upon  ordinary  polices,  the  advan 
tages  in  case  of  continuance  are  also  greater.  These  penalties 
differ  in  degree,  not  in  kind,  and  hence  the  term  gambling  is  no 
more  applicable  to  Tontine  than  to  non-Tontine  Insurance,  and 
in  fact  is  applicable  to  neither.  The  fulfillment  of  the  Tontine 
contract  is  encouraged  rather  than  discouraged  by  these  penalties, 
and  the  greater  benefits  given  on  these  contracts. 

The  companies  generally  might,  with  advantage,  be  more 
frank  and  full  in  statements  to  policy-holders  affecting  their  in- 
terests ;  or,  in  other  words,  might,  with  advantage,  take  policy- 
holders  more  fully  into  their  confidence.  The  best  way  to  clis 
arm  and  dispel  adverse  criticism,  whether  proceeding  from  hon- 
est doubt  or  ignorance,  is  by  the  simple  logic  of  facts  and  figures. 
Signed,  HENRY  J.  REINMUND, 

Superintendent  of  Insurance. 

SHEPPARD  ROMANS. 
Actuary,  Assistant  to  Committee. 

Columbus  August  2,  1885. 

Extracts  from  the  Testimony  given  to  the  Committee. 
Examination  of  the  Equitable  Life. 

"NEW  YORK,  May  29,  1885. 

MR.  JOEL  G.  VAN  CISE,  being  duly  sworn,  testified  as  follows. 
(Examined  by  Mr.  Homans). 

Q.    You  are  one  of  the  actuaries  of  the  Equitable  Society  ? 

A.     Yes. 

Q,     For  how  long  a  time  ? 

A.  I  have  been  connected  with  the  Society  for  eighteen 
years  this  fall.  I  have  been  one  of  the  actuaries  for  about  four 
teen  years. 

Q.  You  have  charge  of  the  books  and  accounts  and  the  cal- 
culations on  Tontine  policies  ? 

A.     Yes,  sir. 

Q.  Please  read  to  the  committee  the  printed  statement  which 
you  have  just  handed  to  me. 

'  As  to  policies  in  the  Tontine  classes,  a  special  account  is  kept 
of  the  income  and  out  go  properly  belonging  to  these  classes  sep- 
arate from  the  other  business  of  the  Society,  so  that  the  amount 
of  the  Tontine  fund,  that  is,  the  share  of  the  whole  amount  of 
assets  properly  belonging  to  policies  in  the  Tontine  classes,  can 
be  ascertained  at  the  end  of  each  year.  To  do  this  the  Tontine 
fund  is  credited  with  all  premiums  received  from  Tontine  policies, 
is  charged  with  a  due  proportion  of  expenses  upon  these  pre- 
miums, receives  credit  for  interest  upon  its  accumulations  pro- 
portionate to  that  made  on  the  total  funds  of  the  company,  and 
has  to  pay  the  losses  by  death  (occurring  among  the  Tontine  poli- 
cies only)  and  the  claims  of  such  policies  as  reach  the  end  of  their 


46  THE   THREE    SYSTEMS 

Tontine  periods.  At  the  end  of  each  year  the  total  amount  of 
the  Tontine  fund,  and  the  total  amount  of  reserve  necessary  to 
have  on  hand  to  secure  the  original  and  absolute  obligations  under 
the  Tontine  policies,  is  calculated  and  the  difference  between 
these  amounts  is  the  Tontine  surplus,  part  of  which  belongs  to 
the  policies  completing  their  Tontine  periods  in  the  year  just  en- 
tered upon,  while  a  far  larger  part  belongs  to  the  far  more  numer 
ous  policies  which  will  mature  in  the  many  succeeding  years.  As 
the  Tontine  policies,  after  completing  their  Tontine  terms,  leave 
the  Tontine  class  and  cannot  participate  in  future  divisions  of 
surplus,  the  opportunity  to  correct  in  each  future  division  any 
error  made  in  previous  distributions  is  taken  away,  and  it  is  nec- 
essary to  determine  with  accuracy  the  share  of  the  surplus  be- 
longing to  the  outgoing  members  of  the  Tontine  class.  It  would 
have  simplified  the  calculation,  perhaps,  to  have  made  separate 
classes  for  each  year  of  issue  of  policies  with  the  same  Tontine 
period,  FO  that  there  would  be  no  mingling  of  the  claims  of  poli- 
cies leaving  the  class  with  the  claims  of  policies  hav'ng  yet 
many  years  to  remain  in  the  class.  But  there  was  the  insu 
perable  objection  to  this  plan,  that  in  small  numbers  and 
even  in  numbers  of  considerable  magnitude,  irregularities  will 
arise  very  troublesome  in  practice  and  giving  rise  to  grave  sus 
picions  of  unfairness,  and  it  is  therefore  desirable  in  all  life 
assurance  calculations  to  take  advantage  of  the  largest  averages 
attainable.  It  was  therefore  decided  that  all  policies  with  the 
same  length  of  Tontine  period,  no  matter  in  what  year  issued, 
should  be  classified  together  for  the  purpose  of  determining  the 
rate  of  dividends  to  be  allowed,  and  the  plan  in  detail  was  this: 
Rates  of  interest,  of  mortality,  of  lapses,  and  of  management 
expenses,  were  assumed,  approximating  to  the  actual  as  nenrly 
as  possible.  On  the  basis  of  these  rates  a  calculation  of  what 
would  be  the  surplus  on  policies  taken  out  at  every  age  and  at 
the  end  of  every  year  of  their  existence  during  the  Tontine  period 
was  made,  and  tables  of  estimated  surpluses  for  all  possible  con 
tingencies  formed.  With  these  tables  it  is  easy  at  the  end  of  each 
year  to  calculate  the  expected  surplus  on  each  Tontine  policy  in 
force.  The  total  of  these  expected  surpluses,  when  compared 
with  the  total  actual  surplus  as  shown  by  the  valuation  of  the 
Tontine  policies,  gives  a  ratio  of  the  expected  to  the  actual  sur 
plus;  and  applying  this  ratio  to  the  estimated  surplus  by  the 
tables  on  policies  just  maturing,  we  get  the  actual  surplus  to 
whkh  they  are  entitled.  The  actual  surplus  for  each  policy 
whose  Tontine  term  is  not  ended,  could  of  course  be  calculated 
in  the  same  way  by  applying  the  ratio  to  the  estimated  surplus 
on  them  as  given  by  the  tables;  but  as  these  policies  cannot  draw 
any  surplus  till  their  Tontine  period  is  concluded,  this  detailed 
calculation  would  be  useless;  and  it  is  sufficient  to  leave  this  sur 
plus  undisturbed  to  accumulate  for  another  year  when  the  same 
work  of  calculation  and  of  distribution  to  the  policies  then  matur- 
ing has  to  be  repeated.' 


. 

OF  LIFE   INSURANCE.  47 

Q.     I  will  ask  you  if  that  statement  is  a  correct  statement  of 
the  way  in  which  you  have  made  the  estimates,  made  up  the  ac- 
counts, and  credited  individuals  who  are  entitled  to  a  credit  under 
Tontine  policies? 
A.    Yes. 

Q.     Has  any  departure  ever  been  made  in  any  Tontine  policy 
or  Tontine  class,  from  the  principles  laid  down  in  that  printed 
statement? 
A.    No,  sir. 

Q.     I  would  like  to  ask  you  if  there  has  ever  been  any  com- 
pulsion or  persuasion  on  the  part  of  the  officers  in  the  case  of  an^ 
individual  policy,  or  any  class  of  policies,  to  alter  or  depart  from 
the  principles,  as  laid  down  there  ? 
A.    No,  sir. 

Q.    And  this  printed  statement,  which  is  copied  here,  is  the 
correct  explanation  of  the  method  adopted  by  the  EQUITABLE 
LIFE  ASSURANCE  SOCIETY,  in  dealing  with  all  its  Tontine  policies? 
A.     Yes,  sir  ;  it  is  printed  for  the  information  of  its  policy- 
holders,  on  the  Tontine  plan. 

Q.  By  Mr.  Romans  :  Am  I  correct  in  this  :  that  in  this  com- 
pany the  Mortality  against  Tontine  policies  only  is  charged 
against  the  Tontine  fund,  whereas,  in  the  New  York  Life,  for 
instance,  they  assume  the  average  Mortality  in  the  Company,  and 
charge  the  average  rate  against  the  Tontine  fund  ? 

A.  It  is  true  that  our  Tontine  policies  and  Tontine  classes 
only  pay  the  death  losses  occurring  in  those  classes.  That  is 
true,  according  to  our  calculations.  What  you  say  in  regard  to 
the  other  Companies— the  New  York  Life  Company,  for  instance 
—is  substantially  true.  Their  dividend  calculations  are  based  upon 
the  fact  of  an  average  Mortality  through  the  Company,  whether 
it  is  Tontine  or  Ordinary  Policies.  The  same  is  true  with  the 
Northwestern. 

Q,  As  I  understand  it,  in  the  policy-contracts  made  with  the 
Tontine  policy-holders,  you  covenant  *.o  charge  only  the  Mor- 
tality arising  from  members  of  the  Tontine  class  ? 

A.  I  do  not  know  that  that  is  covenanted  in  the  application 
of  the  policy,  but  it  has  been  set  forth  in  all  our  circulars  and 
publications. 

Q.  And  in  making  these  awards  of  surplus,  you  have  had 
strict  regard  to  that  peculiarity  ? 

A.  Made  the  exact  calculations  ;  charged  only  for  the  death 
losses  actually  paid. 

Q.  One  point  of  inquiry  that  is  submitted  to  this  committee, 
is  not  only  the  question  as  to  how  the  Tontine  accounts  are  kept, 
but  the  question  is  asked  whether,  in  the  appropriation  of  the 
surplus,  any  portion  of  the  Tontine  fund  has  been  appropriated, 
or  in  any  manner  misapplied,  contrary  to  the  agreement  ? 
A.  Not  one  dollar. 


48  THE  THREE   SYSTEMS 

Q.  And  that  in  all  the  Tontine  accounts  you  have  put  to  the 
credit  of  the  fund  the  total  premiums  received  on  Tontine  poli- 
cies, you  have  charged  that  fund  with  the  avernge  expenses  of 
the  Society  on  its  business,  and  with  the  actual  death  claims 
paid  among  the  members  of  the  Tontine  fund,  and  have  credited 
the  fund  with  the  average  rate  of  interest  received  by  the 
Society  on  its  investments  ? 

A.     Yes,  sir  ;  no  departure  has  been  made  from  that  rule. 

From  schedule  "A"  given  by  the  New  York  Life  to 
the  Senate  Committee,  showing  the  comparative  rate  of  dis- 
continuance of  insurance — lapse — of  Tontine  and  non-Tontine 
made  up  from  the  company's  actual  experience  for  10  years  upon 
policies  issued  in  1872  and  1873,  we  obtain  the  following  inter- 
esting and  instructive  facts : 

Amount  of  Tontine  Insurance  for  which  pre- 
miums were  paid,  first  year $17,889,000 

Amount  of  non-Tontine  Insurance  for  which 

premiums  were  paid,  first  year $19,748,000 

Total  Tontine  Insurance  remaining  in  force, 
end  of  10th  year,  (55  per  cent,  of  original 
amount) " , $9,865,000 

Total  non-Tontine  Insurance  remaining  in 
force,  end  of  10th  year,  (31  uer  cent,  of 
original  amount) . . ," ,7. $6,064,000 

From  schedule  '-B"  we  gather  the  following  facts  with 
reference  to  dividends  upon  Tontine  and  Non-Tontine  policies 
in  Ohio,  during  a  period  of  10  years  : 

EXAMPLE  1.— POLICY  No.  109,314  ;  AMOUNT,  $3,000  ;  DATE, 
Nov.  7,  1874 ;  AGE  OF  THE  INSURED,  31 ;  ANNUAL  PREMIUM, 
$70.05  ;  Ordinary  Life  Tontine. 

(1.)  —Premiums  received  in  10  years $700.50 

(2.)  —Tontine  dividends  in  10  years 269.79 

Per  cent,  of  (2)  to  (1),  38. 

EXAMPLE  2.—  POLICY  No.  118,402;  AMOUNT,  $5,000;  DATE, 
FEB.  28,  1876  ;  AGE,  31  ;  ANNUAL  PREMIUM,  $116.75  ;  Ordinary 
Life,  Non-Tontine 

(1.)— Premiums  received  in  10  years $1,167.50 

(2.)— Dividends  paid  in  10  years 184.49 

(3.)— Dividends  paid  at  6  %  comp.  interest 235.68 

Per  cent,  of  (3  )  to  (1),  20. 


EXAMPLE  3.— POLICY  No.  111,458;  AMOUNT,  $1,000;  DATE, 
FEB.  23,  1875  ;  AGE  OF  THE  INSURED,  40 ;  ANNUAL  PREMIUM, 
$31.30  ;  Ordinary  Life,  Tontine. 

(1.) — Premiums  received  in  10  years ^ $313.00 

(2.)— Tontine  dividends  in  10  years 110.68 

Percent,  of  (2)  to  (1),  35. 


OF  LIFE   INSURANCE.  49 

EXAMPLE  4.— POLICY  No.  117,137  ;  AMOUNT,  $2,500  ;  DATE,. 
DEC.  18,  1875  ;  AGE,  40  ;  ANNUAL  PREMIUM,  $78.25  ;  Ordinary 
Life,  Non-Tontine. 

(1.) — Premiums  received  in  10  years $782.50 

(2.)— Dividends  paid  in  10  years 118.96 

(3.)— Dividends  paid  at  6  %  comp.  interest 151.73 

Per  cent,  of  (3  )  to  (1  ),  19. 


EXAMPLE  5.— POLICY  No.  110,368  ;  AMOUNT,  $3,000  ;  DATE 
DEC.  28,  1874  ;  AGE  OF  THE  INSURED,  54  ;  ANNUAL  PREMIUM. 
$171.06  ;  Ordinary  Life,  Tontine. 

(1.)  — Premiums  received  in  10  years $1,710.60 

(2.)  —Tontine  dividends  in  10  years 610.00 

Percent,  of  (2)  to  (1),  36. 

EXAMPLE  6.— Policy  No.  116,177;  amount,  $1,000;  date,  Oct 
19,  1875  ;  age,  54  ;  annual  premium,  $57.02 ;  Ordinary  Life, 
Non- Tontine. 

(1.)  —Premiums  received  in  10  years $570.20 

(2.)  —Dividends  paid  in  10  years 77.02 

(3.)  —Dividends  paid  at  6  %  comp.  interest 97.78 

Per  cent,  of  (3  )  to  (1),  17. 


EXAMPLE  7.— Policy  No.  111,776;  amount,  $1,000;  date, 
March  10,  1875  ;  age  of  the  insured, 47  ;  annual  premium,  $71.25  , 
lO-Year  Life,  Tontine. 

(1.)— Premiums  received  in  10' years $712.50 

(2.)— Tontine  dividends  in  10  years 193.03 

Per  cent,  of  (2  )  to  (1),  27. 

EXAMPLE  8.— Policy  No.  89,074  ;  amount,  $2,000  ;  date,  May 
2,  1872  ;  age,  46  ;  annual  premium,  $138.52  ;  lO-Year  Life, 
Non -Tontine. 

(1.)— Premiums  received  in  10  years $1,385.20 

(2. )— Dividends  paid  in  10  years 163. 12 

'3.) — Dividends  paid  at  6  %  comp.  interest 201.11 

Per  cent,  of  (3  )  to  (1),  15. 


EXAMPLE  9.— POLICY  No.  107,789  ;  AMOUNT,  $2,000  ;  DATE, 
AUG.  12,  1874  ;  AGE  OF  THE  INSURED,  30  ;  ANNUAL  PREMIUM, 
$60.72  ;  2O--Year  Life,  Tontine. 

(1.)— Premiums  received  in  10  years $607.20 

(2.)— Tontine  Dividends  in  10  years 219.60 

Per  cent,  of  (2)  to  (1),  36. 

EXAMPLE  10.— POLICY  103,563  ;  AMOUNT,  $3,000  ;  DATE,  JAN. 
14,  1874 ;  AGE,  32  ;  ANNUAL  PREMIUM,  $95.22  ;  20-Year  Life, 
Non -Tontine. 


50  THE   THREE   SYSTEMS 

(1.) — Premiums  received  in  10  years $952.20 

(2.) — Dividends  paid  in  10  years 135.64 

(3.) — Dividends  paid  at  6  %  comp.  interest 170.68 

Per  cent,  of  (3)  to  (1  ),  18. 


EXAMPLE  11.— Policy  No.  91,599  ;  amount,  $5,000  ;  date,  Aug. 
17,  1872;  age  of  the  insured,  30;  annual  premium,  $242.65; 
2O-Year  Endowment,  Tontine. 

(1.)— Premiums  received  in  10  years $2,426.50 

(2. )— Tontine  dividends  in  10  years 928.79 

Per  cent,  of  (2)  to  (1),  38. 

Example  12.— Policy  No.  88,387  ;  amount  $1,000  ;  date,  April 
5,  1872  ;  age,  30  ;  annual  premium,  $48.53  ;  20-Year  Endow- 
ment, Non-Tontine. 

(1.)— Premiums  received  in  10  years $485.30 

(2).— Dividends  paid  in  10  years 67.38 

(3). — Dividends  paid  at  6  %  comp.  interest 84.25 

Per  cent,  of  (3  )  to  (1  ),  17 


The  preceding  examples  illustrate  the  marked  difference 
between  dividends  on  Tontine  policies  and  those  on  Non- 
Tontine  policies,  when  issued  at  about  the  same  age,  on 
the  same  plan,  and  having  been  in  force  the  same  number  of 
years.  Comparing  examples  (1)  and  (2),  it  will  be  seen  that  the 
Tontine  surplus  on  the  former,  at  the  end  of  10  years,  is  38  per 
cent,  of  all  the  premiums  paid,  while  the  dividends  paid  on  the 
latter,  the  non-Tontine  policy,  improved  by  six  per  cent,  com- 
pound interest,  amount  to  only  20  per  cent,  of  the  premiums  paid 
during  the  same  number  of  years!  By  comparing  (3)  with  (4); 
(5)  with  (6);  (7)  with  (8);  (9)  with  (10),  and  (11)  with  (12),  a  corre- 
sponding marked  difference  is  observed  between  the  dividends  of 
Non-Tontine,  and  the  accumulated  surpluses  of  Tontine, 
policies,  in  the  same  company.  In  another  company,  while  the 
per  cent,  of  difference  between  the  Tontine  and  non-Tontine 
policies  might  not  vary  materially  from  that  shown  above,  yet 
the  dividends  themselves  might  possibly  be  very  much  less, 
or  considerably  greater,  than  those  shown  in  these  examples,  on 
the  same  kind  of  policies  issued  at  the  same  ages,  and  having 
been  in  force  the  same  number  of  years.  Leaving  out  the  Massa- 
chusetts companies,  nearly  all  the  Life  Companies  doing  business 
in  the  United  States  have  incorporated,  in  one  way  or  another, 
the  Tontine  principle,  and,  if  one  wants  a  Tontine  policy,  he 
should  exercise  a  reasonable  amount  of  caution  and  good  com- 
mon sense  in  the  selection  of  a  company.  A  company  that  gives 
large  dividends  on  the  ordinary  kinds  of  policies  can  give  much 
larger  on  the  same  kinds  when  Tontined;  and,  a  company  that 
pays  but  meagre  dividends  on  the  usual  forms,  adopting  perhaps 


OP    LIFE    INSURANCE.  61 

the  Tontine  system  to  "  cover  up  "  its  small  surpluses,  canno* 
be  relied  on  for  large  returns  of  surplus  under  the  Tontine 
forms  of  insurance. 

Accumulative  Dividend — Distribution — Bonus  Pol- 
icies, Etc  — With  very  few  exceptions  the  old  forfeiture 
principle  of  the  Tontine  system  has  now  been  eliminated. 
Indeed,  the  very  name  itself  has  disappeared.  The  modern 
contract  providing  for  deferred  dividends  is  known  by  various 
names,  such  as  Accumulative— Dividend,  Distribution  or 
Bonus  policies.  Instead  of  providing  absolute  forfeiture  of 
all  interest  in  the  accumulations  and  surplus  earnings  of  the 
policy,  or  allowing  only  a  small  paid-up  contract  in  case  of 
lapse,  surrender  values  are  allowed  at  the  end  of  any  year 
after  the  third,  and  in  some  cases  after  the  second.  These 
surrender  values  are  of  three  kinds,  viz.,  cash  terminating 
the  contract  absolutely;  paid-up  insurance  payable  on  the 
same  terms  as  the  original  policy,  or  extended  insurance  car- 
rying the  full  amount  of  the  policy  for  a  specified  period,  vary- 
ing in  length  according  to  the  number  of  years  the  original 
has  been  in  force. 

The  forfeiture  of  dividends  is,  therefore,  the  only  feature 
of  the  Tontine  contract  left,  the  persistent  policy-holders 
sharing  in  the  surplus  accumulated  on  contracts  which  do  not 
continue  to  the  end  of  the  dividend,  distribution  or  bonus 
period.  The  same  arguments  in  favor  of  this  modified  form 
apply,  as  in  the  case  of  the  old  contracts,  for  all  other  things 
being  equal,  the  dividends  paid  at  the  end  of  a  period  of,  say, 
ten,  fifteen  or  twenty  years,  must  be  greater  than  the  sum  of 
the  annual  dividends  paid  by  the  same  company,  even  after 
allowing  for  the  compounding  of  interest  on  the  latter.  That 
such  policies  best  meet  the  requirements  of  the  public  is 
shown  by  the  fact  that  the  companies  not  issuing  them  are 
now  in  a  very  small  minority,  and  recent  legislation  (in  1900) 
in  Massachusetts  recognizes  the  demand  for  such  contracts 
by  permitting  companies  of  that  Commonwealth  to  defer  the 
payment  of  dividends  for  a  longer  period  than  the  five  years 
to  which  they  have  been  heretofore  limited. 


THE    THREE    SYSTEMS 

CHAPTER  vi. 


PREMIUMS. — PREMIUM  NOTES. — SURPLUS. — VALUE  OF  A  POL- 
ICY. —  LIFE  INSURANCE  FAILURES.  —  LIFE  INSURANCE 
EXPENSES. 

Premiums. — The  sums  required  to  keep  a  policy  in  force, 
according  to  its  conditions.  In  "The  Level  Premium  System " 
of  Life  Insurance,  every  premium  is  composed  of  three  elements, 
the  Reserve  Element,  the  Mortality  Element,  and  the  Expense 
Element.  The  annual  premium  on  an  ORDINARY  LIFE  POLICY, 
for  $10,000,  at  the  age  of  35,  is,  say,  $264.90.  This  is  made  up 
for  the  first  year  as  follows: 

1.  THE  RESERVE  ELEMENT $110.39 

2.  THE  MORTALITY  ELEMENT 38.27 

3.  THE  EXPENSE  ELEMENT.  .  66.24 


GROSS  PREMIUM $264.90 

See  page  65,  for  a  full  explanation  of  each  of  these  ele- 
ments. The  three  elements  combined  make  up  what  is  called  the 
gross  premium.  The  first  two  elements,  combined,  amounting  to 
$198.66,  make  what  is  called  the  net  premium;  and  similarly 
with  reference  to  any  other  premium  for  any  kind  of  a  policy 
issued  under  The  Level  Premium  System.  It  must  be  borne 
in  mind  that  as  the  policy  increases  in  age  the  reserve  element 
of  each  annual  premium  decreases  in  amount,  while  the  mor- 
tality element  increases  in  order  to  provide  for  the  more 
numerous  deaths  which  occur  with  advancing  age. 

Premium  Notes. — Notes  given  by  policy-holders  in  lieu  oi 
a  part  of  the  cash  payment  of  the  premium.  These,  if  not  paid 
or  canceled  by  future  dividends,  must  be  deducted  from  the 
amount  insured  in  case  of  death,  or  at  the  maturity  of  an 
endowment. 

Surplus.— The  sum  left,  after  providing  for  the  liabilities- 
present  and  prospective — of  a  company. 

Value  of  a  Policy— The  Reserve.— The  net  value  of  a 
policy  is  the  difference  between  the  net  single  premium  for 
the  sum  insured  at  the  age  of  the  policy  holder,  when  the 
policy  is  valued,  and  the  present  value  of  all  future  net 
premiums  calculated  to  be  received.  The  gross  value  of  a  policy 
is  the  difference  between  the  net  single  premium,  as  given  above, 
and  the  present  value  of  all  future  gross  premiums  to  be  re- 
ceived on  the  policy. 

Owing  to  a  fixed  law  governing  these  reserves,  life  insurance 
mathematics  enables  one  familiar  with  it  to  tell,  not  only  the 
present,  but  also  the  future,  net  value  of  any  kind  of  a  policy. 
A  tabulated  statement  of  the  yearly  net  values,  from  the  present 


OF   LIFE   INSURANCE.  53 

to  any  future  date,  is  called  an  "ABSTRACT  OF  NET  VALUES"  for 
that  policy.     Some  of  the  advantages  of  such  an  abstract  are  : 

1.  It  names  the  amount  of  cash  held  by  a  company  in 
the  "Reserve  Accumulation,"  from  year  to  year,  to  the  credit 

of  a  policy,  for  a  term  of  years. 

2.  It  indicates  ihe  equitable  cash  surrender  value  of    a 
policy,  from  year  to  year,  for  a  designated  period  of  time,  com- 
mencing with  the  present.     The  cash  surrender  value  is  generally 
from  30  to  95  per  cent,  of  the  reserve  accumulations. 

3.  It   indicates    the    amount  of   paid-up    insurance  that 
should  be  given,  if  desired,  in  exchange  for  the  original  policy, 
or  the  term  for  which  the  original  insurance  can  be  extended 
without  further  payment  of  premium. 

4.  It  indicates  the  amount  of  cash  loan  that  could  safely 
be  made  on  a  policy,  if  assignable,  as  collateral  security. 

5.  It  is  a  safe  guide  to  a  correct  decision  on  any  proposed 
changes  affecting  present  insurance. 

6.  It  enables  one  to   closely  approximate  the  loss  on  a 
deferred  dividend  policy,  if  the  required  number  of  premiums 

.  be  not  paid,  as  specified  in  the  contract. 

7.  It  gives  a  correct  basis  for  dividends,   if  any,  which 
can  be  paid  by  companies  in  the  hands  of  Receivers. 

8.  Such  an  Abstract  makes  its  owner  thoroughly  intelli- 
gent, at  all  times,  with  reference  to  his  Insurance.     It  is  protec- 
tion to  the  insured  ;  it  is  protection  to  his  family. 

9.  "Without  one  of  these  Abstracts,  for  each  policy  in 
force,  one  possesses  property  the  cash  value  of  which  he  knows 
little  or  nothing.     He  is  annually  making  cash  deposits  with  no 
definite  information  as  to  the  balances  in  his  favor.     The  cost 
of  insurance  is  the  difference  between  the  actual  amount  of 
cash  premiums  paid  and  the  cash  surrender  value  of  the  reserve 
accumulations  to  the  credit  of  the  policy.     One  is  supposed  to 
know  what  he  has  paid.     An  Abstract  tells  him  the  amount  of  his 
reserve  accumulations.     Nearly  all  policies  issued  now  con- 
tain tables  setting  forth  what  the  company  guarantees  in  the 
event  of  non-payment  of  premium  after  two,  or,  in  most  cases, 
three  years.     Such   tables   show   the    cash    surrender   values 
and  its  equivalent  in  paid-up  insurance  or  the  term  of  ex- 
tended insurance. 

LIFE  INSURANCE  FAILURES. 

In  a  pamphlet,  entitled  "Life  Insurance;  its  history  in 
the  United  States  during-  the  last  half  century."  Pub- 
lished by  the  GLOBE  NEWSPAPER  COMPANY,  Boston,  Mass.  1885, 
is  the  following : 


54  III  !•.    Til  KKK    SYSTF.MJ-" 


"In  1860  there  were  but  fifteen  Life  Insurance  Companies  doin^ 
business  in  the  country,  and  all  but  two  of  these  companies  ;u< 
doing  business  now.  In  1865  the  number  had  increased  to  twenty- 
five.  From  this  time  there  was  a  perfect  delude  of  additions  to 
the  companies.  By  1871  there  were  seventy -two  con  panic  s  try- 
ing to  do  a  business,  which  might  well  have  been  left  to  the  orig 
inal  fifteen.  There  peemed  to  be  a  perfect  craze.  Each  city  must 
have  its  Life  Insurance  Company,  and  one  being  organized  an- 
other must  become  its  rival.  Men  who  had  failed  in  everything 
else  thought  that  because  there  had  never  been  a  failure  in  Life 
Insurance  it  was  their  field.  Men  who  knew  nothing  about  the 
business  organized  companies,  bought  furniture  and  books,  and 
setup  shop  as  a  Life  Insurance  Company.  The  business  was 
tampered  with  to  an  extent  which  had  never  fallen  to  the  lot  of 
any  other  business.  Of  the  seventy-two  companies  in  1871,  it 
is  probable  that  not  thirty  of  these  had  educated  Life  Insurance 
men  at  their  heads.  What  could  one  expect  as  a  result  of  th's 
craze?  Could  one  suppose  that  it  would  meet  a  fate  different 
from  that  of  all  other  business  handled  by  men  who  know  noth 
ing  of  it?  Let  any  sensible  man  answer  the  questions.  Could 
one  have  expected  these  companies  to  succeed?  People  do  not 
buy  their  hats  of  shoemakers,  nor  do  they  buy  shoes  of  tailors. 
A  farmer  or  a  butcher  could  undoubtedly  cutoff  a  leg,  but  he 
would  be  sure  to  kill  his  patient,  A  well  educated  physician 
would  surely  make  a  failure  in  trying  an  intricate  law  case,  and 
an  expert  attorney  would  doubtless  be  capsized  in  trying  to  s:iil 
a  boat.  The  trouble,  and  the  sole  trouble  with  the  mushroom 
Life  Insurance  Companies  was  that  men  undertook  to  do  wh?-t 
they  did  not  know  how  to  do,  and  they  failed,  just  as  it  was  cer- 
tain that  they  would  fail." 

"Taking  every  organization  that  ever  did  any  business  in  Life 
Insurance,  and  the  record  is  that  seventy-seven  companies  have 
been  in  the  business  that  are  not  now  in  the  business.  (.Here 
followed  a  list  of  the  companies.)  There  have  been  a  few 
other  futile  attempts  to  establish  a.  Life  Insurance  Company, 
but  the  foregoing  is  a  list  of  the  companies  that  came  before 
the  public  for  business,  and  that  did  business  of  any  con- 
sequence." 

"  Some  of  the  above-named  companies  failed  outright, .some  of 
them  reinsured  their  risks  in  other  companies,  which  afterwards 
.failed,  others  of  them  reinsured  their  risks  in  companies  which 
are  solvent,  and  which  have  carried  out  all  of  the  original  con 
tracts,  and  some  of  them  did  not  do  any  business  at  all.     The  fol 
lowing  table  shows  the  assets  of  fifteen  of  the  larger  of  the  com 
panics  at  the  last  annual  report,  before  thry  ceased  business.  The 
assets  of  the  other  companies  are  stated  with  just  as  much  preci 
sion,  bui  are  placed  in  one  sum: 

gg"  Knickerbocker/I*.  Y...  ...  $6,038,331 

North  American,  N.  Y **5,789.074 

Globe,  N.  Y 3,613,291 

Continental,  N.  Y 6,229,484 

Security,  N.  Y 3,683;iP6 

Life  Association,  Mo "  3,043.538 

St.  Louis  Mutual.  Mo... 6,195,329 

Universal,  N.  Y 3,542,320 

Guardian,  N.  Y '3.97^,976 

New  Jersey  Mutual,  N.  J 1.808,882 

Atlantic  Mutual,  N.  Y     1,252,010 

Widows'  and  Orphans',  N.  Y  ..  .     1,599,068 

Republic,  III .     2.1)34,541 

World,  N.  Y 344,258 

All  other  companies _. 11,493,145 

Total $60,638,339 


OF    LIFE    INSURANCE.  55 

"It  will  thus  be  seen  that  the  total  assets  of  all  the  companies 
that  have  failed  in  this  country,  given  in  the  last  annual  report 
before  they  failed,  was  about  $60,000,000.  But,  as  before  said,  in 
a  number  of  cases  the  risks  were  safely  reinsured  in  other  com- 
panies. The  amount  of  these  reinsurances,  at  a  safe  estimate, 
would  reduce  the  amount  to  $40,000,000.  Then,  again,  the  fail- 
ures were  not  absolute.  In  some  cases  nearly  the  whole  liability 
was  saved.  In  others  a  large  portion  was  saved.  It  is  not  prob- 
able that  over  half  the  amount  was  really  lost.  Still,  it  may  be, 
and  probably  is,  true  that  $25.000,000  have  been  lost  by  those 
Life  Insurance  Companies  that  failed." 

"  When  we  look  at  the  enormous  business  of  Life  Insurance  in 
this  country,  and  at  the  great  good  it  has  accomplished,  the  life 
insurance  failures  seem  very  small  compared  with  the  failures  of 
banks  in  the  last  forty  years,  or  with  failures  in  any  other  class 
of  business,  the  amount  is  small  indeed." 

The  article  then  goes  on  to  state  the  amount  of  losses  that 
these  companies  paid  while  doing  business.  They  are  given  in 
detail  and  amount  to  $41,208,015.  It  concludes  with  the 
following: 

"  Compare  the  amount  of  money  lost  by  Life  Insurance  Com- 
panies which  have  failed,  and  the  good  accomplished  by  these 
very  companies  in  the  payment  of  over  $41,000,000  of  losses,  and 
give  credit  where  credit  is  due.  Can  any  other  business  show  as 
much  good  accomplished  where  the  business  has  resulted  in  fail- 
ure? But  there  is  another  perfectly  just  way  to  look  at  the 
money  lost  by  failed  Life  Insurance  Companies.  It  is  a  large 
estimate  to  call  the  amount  $25,000,000.  The  Life  Insurance 
Companies,  as  has  been  shown  previously,  have  assets  of  about 
$500,000,000.  They  have  paid  dividends  of  about  $250,000,000, 
and  they  have  paid  in  purchase  of  policies  before  maturity  about 
$150,000,000.  Jf  this  amount  be  added  to  the  amount  used  in 
expenses  of  management,  we  may  say  that  the  Lite  Insurance 
Companies  of  this  country  have'handled  about  $1,500,000,000, 
and  that,  in  doing  so,  some  inexperienced  men,  who  engaged  in 
the  business  and  failed,  lost  $25,000,000.  Take  the  business  in 
any  way,  look  at  it  from  all  sides,  and  then  make  the  record,  and 
tell  the  results. 

"  Let  the  record  be  told  as  it  is.  Say  it  boldly,  Between  one 
and  two  per  cent,  of  the  money  handled  by  the  Life  Insurance 
Companies  has  been  lost  by  bad  management.  If  the  wisest  men 
in  the  world  had  conducted  all  of  the  business,  we  could  not 
have  expected  better  results.  Let  any  man  who  is  disaffected  as 
to  life  insurance,  because  some  companies  have  failed,  look  at 
the  facts  as  they  are,  and  he  will  forever  after  compliment  the 
business  rather  than  criticise  it  adversely.  The  result  is  in  favor 
of  the  business.  It  is  complimentary  in  every  way." 

In  the  course  of  an  extended  review  of  life  insurance,  pre- 
pared by  John  A.  McCall,  president  of  the  New  York  Life, 
and  read  before  the  National  Convention  of  Insurance  Com- 
missioners in  September,  1898,  the  following  remarks  were 
made  on  the  subject  of  life  insurance  failures: 

The  nine  years  immediately  following  the  first  convention 
must  be  accounted  the  most  trying  period  in  the  history  of 
American  life  insurance.  The  number  of  companies  which 
ceased  doing  business  in  New  York  was  forty-six.  Only  four 


66  THE    THREE    SYSTEMS 

reinsured  in  companies  th.t  remained  solvent;  only  ten  others 
paid  their  liabilities  in  full.  Receivers'  reports  are  incom- 
plete, but  a  careful  examination  of  such  as  are  accessible 
show  the  total  loss  to  policy-holders  by  failures  among 
American  life  companies  to  be  about  thirty-five  million  dol- 
lars, nearly  all  of  which  occurred  during  this  period. 
****** 

The  loss  to  solvent  companies  of  business,  as  well  as  of 
prestige,  during  this  period  was  very  great.  In  1870  the  in- 
come of  the  companies  doing  business  in  New  York  was 
$105,000,000,  in  1879  it  was  $76,000,000;  in  1870  the  new  busi- 
ness was  $588,000,000,  in  1879  it  was  $168,000,000;  in  1870  the 
risks  in  force  were  $2,024,000,000,  in  1879  they  were  $1,440,- 
000,000.  Notwithstanding  the  removal  of  so  many  competitors 
from  the  field  the  business  of  the  thirty-one  solvent  com- 
panies was  less  in  1879  than  that  of  the  same  companies  in 
1870;  their  income  was  two  millions  less,  their  risks  in  force 
were  seventy  millions  less,  and  their  new  business  had  fallen 
off  over  one-half.  The  total  new  paid-for  business  of  all  the 
companies  in  1879  was  nearly  thirty-eight  million  dollars  less 
than  has  since  been  written  in  one  year  by  a  single  company. 

Yet  all  these  losses  and  failures  are  but  a  part — and  a 
small  part  at  that — of  the  loss  and  failure  which  overtook  the 
business  interests  of  the  country  generally  during  the  same 
period.  The  financial  panic  of  1873  marked  the  culmination 
of  the  over-trading,  over-building  and  over-capitalization 
which  resulted  naturally  from  the  inflation  of  the  currency 
during  the  civil  war.  Life  insurance  had  grown  more  rapidly 
than  any  other  business  of  equal  magnitude;  its  failures  and 
losses  were  proportionately  much  less.  At  the  end  of  1873  the 
entire  capital  account  of  the  railroads  of  the  country  was 
about  thirty-eight  hundred  million  dollars,  and  during  the 
next  six  years  roads  representing  nearly  one  thousand  mill- 
ions were  sold  under  foreclosure  or  went  into  receivers' 
hands.  The  assets  held  by  failing  life  companies  amounted 
to  about  one-ninth  of  the  total;  the  assets  of  defaulting  rail- 
road companies  represented  over  one-quarter  of  the  total. 
About  one-fourth  of  all  the  savings  banks  in  New  York  went 
out  of  existence  during  the  six  years  following  1871,  with 
losses  amounting  to  about  four  and  one-half  million  dollars. 
The  Superintendent  of  the  Banking  Department,  commenting 
on  these  figures,  said,  if  the  funds  of  all  savings  banks  in  the 
State  had  been  invested  in  United  States  bonds  in  1871  the 
shrinkage  would  have  been  seven  million  dollars;  if  in  the  best 
railroad  securities  it  would  have  been  over  thirty  millions;  if 
in  the  best  bank  stocks,  thirty-five  millions,  and  if  in  real 
estate,  from  forty  to  fifty  millions. 

It  has  been  the  custom  of  writers  who  would  exalt  life  in- 
surance to  give  scant  space  to  the  discussion  of  the  failures 
and  losses  of  this  period,  tut  to  my  mind  there  is  no  period  in 
life  insurance  history  that  deserves  more  careful  study,  and 
none  that  contains  more  valuable  lessons  to  the  life  insurance 
manager.  Why  did  these  companies  fail?  A  true  and  com- 
plete answer  to  that  question  would  put  every  officer  and 
every  trustee  of  a  life  company  on  his  guard  against  like 
causes  and  a  like  catastrophe.  As  we  have  already  seen,  these 
failures  were  contemporaneous  with  many  other  failures  in  the 
business  world,  and  something  must  unquestionably  be 


OF    LIFE    INSURANCE.  57 

allowed  for  the  great  shrinkage  in  values,  as  measured  by  the 
currency  of  the  country,  between  1864  and  1879.  But,  the 
companies  that  survived  and  increased  in  strength  were 
obliged  to  meet  the  same  conditions — how  did  they  escape? 
A  study  of  the  reports  of  this  period  shows  but  very  little 
charged  off  to  profit  and  loss  by  the  failing  companies,  but  a 
study  of  their  condition  at  the  time  of  failure  shows  a  great 
gulf  between  actual  and  assumed  value  of  assets.  In  many 
of  these  companies  gross  frauds  had  been  practiced  for  years, 
and  a  thorough  examination  would  have  exposed  them.  In 
others,  loans  had  been  made  on  insufficient  security  and  with 
evident  profit  to  favored  individuals.  In  some  cases  loans 
upon  which  neither  interest  nor  taxes  had  been  paid  for  years 
were  carried  on  the  books  at  their  full  face  value.  Such 
assets,  under  the  inexorable  rules  of  a  receivership,  melted 
away  like  snow  beneath  a  summer  sun.  Six  of  the  largest 
failing  companies  having  their  domiciles  in  New  York  State 
made  the  following  showing:  Real  estate  owned  and  bonds 
and  mortgages  on  real  estate,  at  the  companies'  last  reports, 
$14,160,057,  amount  realized  from  same  by  receivers  $4,449,- 
984,  or  about  thirty-one  and  one-half  per  cent.;  all  other 
assets,  by  companies'  last  reports,  $4,538,196,  amount  realized 
by  receive  s  $2,232,424 — a  little  over  forty-nine  per  cent. 
During  the  continuance  of  these  receiverships  there  was  re- 
ceived, in  addition  to  the  foregoing,  as  interest  and  rents  on 
all  property,  $676,030,  and  $908,302  was  paid  out  as  real  estate 
expenses:  Other  expenses  of  these  receiverships  were  $1,678,- 
172,  or  a  little  over  twenty-two  per  cent,  of  total  receipts. 

But  what  brought  these  companies  so  near  the  "ragged 
edge"  of  insolvency,  according  to  their  own  statements  and 
valuations,  that  their  true  condition  could  no  longer  be  con- 
cealed? For  an  answer  to  this  question,!  have  tabulated  the 
most  important  items  of  income  and  expenditure  of  the 
largest  of  these  companies,  as  they  appear  in  the  New  York 
reports,  from  1864  until  the  companies  ceased  doing  business 
in  the  State.  The  examination  covers  seven  New  York  com- 
panies with  an  average  of  over  twelve  years  of  business,  and 
seven  other  State  companies  with  an  average  of  over  six 
years  of  business.  These  fourteen  companies  absorbed  by  re- 
insurance previous  to  their  demise  fourteen  other  companies, 
and  together  they  -epresent  the  bulk  of  the  failures,  as  re- 
gards amount  of  business  and  losses  incurred,  that  have  taken 
place  among  American  life  insurance  companies.  As  a 
standard  of  comparison  I  have  taken  the  record  for  ten 
years,  1865  to  1874,  both  inclusive,  of  the  twenty-six  com- 
panies which  were  in  existence  during  the  period,  1864-1879, 
and  which  are  still  solvent  and  active.  The  following  is  a 
summary  of  the  results:  (i)  The  interest  rate  of  the  failing 
companies  was  nearly  one  per  cent.  (.86)  less  than  that  of  the 
solvent  companies;  (2)  expenses  of  management  in  the  fail- 
ing companies  were  nearly  seven  per  cent,  more  of  pre- 
mium receipts,  or  about  four  and  one-half  dollars  more  per 
thousand  of  insurance  in  force,  than  in  the  solvent  companies; 
(3)  death  claims  paid  were  nearly  three  per  cent,  more  of 
premium  receipts,  or  nearly  three  dollars  per  thousand  of  in- 
surance, higher  in  the  failing  companies  than  in  the  solvent 
companies.  The  higher  rate  of  interest  earned  by  the  solvent 
companies  would  have  given  the  failing  companies  nearly 


68  THE    THREE    SYSTEMS 

four  million  dollars  more  in  interest  receipts;  the  lower  rate 
of  expenses  cf  management  of  the  solvent  companies  would 
have  saved  the  failing  companies  between  twelve  and  sixteen 
million  dollars;*  and  the  lower  death-claim  ratio  of  the  solv- 
ent companies  would  have  saved  the  failing  companies  be- 
tween four  and  ten  million  dollars.* 

During  the  period  covered  by  this  review  the  failing  com- 
panies paid  nearly  nineteen  million  dollars  in  dividends  to 
policy-holders,  but  the  ratios,  both  to  premiums  and  to  in- 
surance carried  one  year,  were  but  little  more  than  one-half 
as  large  as  in  the  solvent  companies.  The  results  attained  by 
considering  the  question  from  opposite  sides  corroborate 
each  other;  for  example,  the  additional  amount  needed  by 
the  failing  companies  to  pay  as  large  dividends  as  were  paid 
by  the  solvent  companies  would  have  been  (according  as  the 
ratio  to  insurance  or  to  premiums  is  used)  from  fifteen  to 
twenty  million  dollars;  while  the  saving  to  the  failing  com- 
panies by  ratios  of  interest,  expenses  and  death  claims  as 
favorable  as  those  of  the  solvent  companies,  would  have  been 
from  twenty  to  twenty-nine  million  dollars.  With  the  same 
rates  of  interest,  expenses  and  death  claims  as  the  solvent 
companies,  the  failing  companies  might  have  paid  the  same 
rate  of  dividends  and  added  from  five  to  nine  millions  to  sur- 
plus; the  solvent  companies,  with  almost  exactly  three  times 
as  much  business,  in  the  period  under  review,  actually  added 
over  sixteen  millions  to  surplus. 

****** 

It  seems  clear  from  this  review  that  these  failures  resulted 
from  bad  management,  in  the  broadest  sense  of  the  term. 
It  was  extravagant,  wasteful,  dishonest.  It  paid  too  much 
for  services  rendered;  it  did  not  take  proper  care  of  the  re- 
sults obtained.  The  data  upon  which  it  proceeded  were  not 
deceptive;  no  company  failed  because  of  an  excessive  death 
rate,  nor  (save  in  a  single  case)  because  it  was  impossible  to 
realize  a  rate  of  interest  equal  to  that  upon  which  its  pre- 
miums were  cast.$  The  assumption  which  failed  was  that 
the  loading  on  the  net  premiums  would  equal  expenses  and 
losses  on  investments.  Some  of  the  smaller  companies  were, 
indeed,  honestly  managed,  and  reinsured  while  solvent;  their 
mistake  was  in  reinsuring  in  badly  managed  companies. 
There  were  others  which  might  have  been  saved  by  more 
judicious  handling  on  the  part  of  the  officers  of  the  law;  their 
mistake  was  in  approaching  so  near  the  "dead  line"  that 
officers  of  the  law  could  drag  them  over  it.  In  no  other  busi- 
ness is  failure  so  disastrous  as  in  life  insurance;  in  no  other 
is  it  so  unnecessary;  in  no  other  is  it,  therefore,  so  inexcus- 
able. It  is  of  no  use  to  lay  the  blame  of  failure  upon  the  law 
that  makes  a  net  valuation  the  test  of  solvency,  because  this 
law  existed  before  most  of  these  companies  began  business. 
That  was  one  of  the  conditions  of  their  life,  to  be  prepared 
for  and  conform  to,  as  much  as  any  other  condition.  As  it  is 
the  province  of  history  to  teach  us  how  we  may  avoid  the  mis- 
takes of  our  predecessors,  I  venture  to  suggest  the  following 
as  some  of  the  safeguards  suggested  by  this  study: 

I.  The  utmost  care  in  making  investments — security  to 
be  always  the  paramount  consideration. 

?    *  According  as   it  is  calculated  on  premiums  or   insurance.         J  The  Universal, 
which  assumed  six  per  cent  interest  in  calculating  its  premiums 


OF    LIFE    INSURANCE.  59 

2.  The  necessity  of  frequent  revaluations  of  securities, 
and  of  their  rigid  adjustment  to  changing  conditions. 

3  The  close  study  of  a  company's  business  upon  the 
principles  of  the  "Gain  and  Loss  Exhibit"  now  required  by 
several  insurance  departments. 

4.  The  assumption,  for  purposes  of  practical  administra- 
tion, of  a  higher  standard  of  reserve  than  that  by  which  the 
company's  solvency  is  tested  under  the  law. 

The  first  of  these  suggestions  may  reduce  the  rate  of  in- 
terest, but  it  will  save  the  principal;  the  second  will  prevent 
any  serious  reduction  of  assets  by  insurance  officials;  the  third 
will  locate  the  fault  of  administration,  if  there  be  one;  and  the 
fourth  will  preserve  a  strip  of  neutral  ground  between  the 
path  the  company  has  marked  out  for  itself  and  the  line  to 
which  it  cannot  come  near  with  safety. 


LIFE    INSURANCE    EXPENSES. 

The  following  figures  with  reference  to  the  comparative 
expenses  of  Life  and  Fire  Insurance  companies  are  compiled 
from  tables  found  in  the  Insurance  Year  Book,  1900-1,  those 
referring  to  Railroad  corporations,  from  Poor's  Manual,  1899: 


Total  income  of  American  Life  Insurance 

Companies,  from  1895  to  1899  inclusive, 

five  years  $1,551,421,435 

Total  premium  income  for  the  same  time.  1,240,528,042 

Total  expenses  for  the  same  time 392,479,353 

Ratio  of  expenses  to  total  income 25.3  per  cent. 

Ratio  of  expenses  to  premium  income....  31. 6  per  cent. 


Total  income  of  American   Fire  and   Ma- 
rine Insurance  Companies,  from  1895  to 

1899,  inclusive,  five  years $529,335,575 

Total  expenses  for  the  same  time 184,352,004 

Ratio  of  expenses  to  total  income 34.8  per  cent. 


Total  income  of  Foreign  Fire  and  Marine 

Insurance  Companies  doing  business  in 

the  United  States  from  1895  to  1899,  five 

years  256,230,553 

Total  expenses  for  the  same  time 82,009,451 

Ratio  of  expenses  to  total  income 32  per  cent. 


Total  gross  traffic  earnings  of  the  Railroad 

companies  of  the  United  States  from 

1894  to  1898,  inclusive,  five  years $5,693,646,657 

Total  net  traffic  earnings  the  same  time.  ..  1,710,215,417 

Total  expenses  for  same  time .3,983,431,240 

Ratio  of  expenses  to  gross  traffic  earnings.  70  per  cent. 


f)0  TIIK    Til  RKI-:    SYSTEMS 

The  Hon.   Blizur  Wright,  in  1863,  said: 

"  The  proper  office  expenses  of  the  companies,  apart  from 
the  use  of  the  press  to  enlighten  the  public  mind,  are  usually  very 
moderate  compared  with  those  of  most  other  moneyed  corpora- 
tions. To  these  must  be  added  taxes  and  legal  expenses,  indis- 
pensable to  protect  the  common  fund  against  the  raids  of  fraud." 

Also  the  following: 

"  The  expenses  of  management  do  not  ordinarily  increase  in 
proportion  to  the  business,  but  it  is  in  the  largest  companies 
that  the  largest  percentage  of  the  premium  has  either  returned  to 
the  policy-holders  or  is  accumulated  for  their  benefit/' 

These  statement  are  doubtless  as  true  to-day  as  in  1863,  as 
shown  by  the  comparison  just  made  of  the  expenses  of  Life 
Insurance  companies  with  those  of  Fire  and  Marine  compa- 
nies and  Railroad  companies.  But,  as  a  safe  test  of  the  economy 
of  one  life  insurance  company  with  that  of  another,  in  matters  of 
expense,  the  comparison  of  expenses  with  total  or  premium  in- 
come is  questioned  by  some  of  our  best  thinkers  on  the  subject. 

Mr.  Wright  said,  in  1873  : 

"  When  two  companies  are  to  be  compared  in  regard  to  the 
economy  of  their  working  expenses,  comparing  their  respective 
ratios  of  expense  to  either  total  or  premium  receipts  is  about 
as  idle  as  it  would  be  to  count  the  buttons  on  the  clothing  of 
their  respective  presidents." 

One  of  the  oldest,  most  conservative,  and  best  managed  Life 
Insurance  companies  in  the  United  States  takes  the  position  that 
the  ratio  of  gross  insurance  expenses  to  net  insur- 
ance claims  met,  during  any  year,  is  the  only  clearly  intelli- 
gible and  scientific  test  of  the  economy  of  expenses.  The  company 
illustrates  this  new  test  by  reference  to  its  own  record  of  business 
in  1884,  as  follows: 

Gross  expenses $360,1  70.17 

Deduct  investment  expenses 74,757.00 

(1)  Gross  insurance  expenses 285,413.17 

Gross  death  claims 973,693.00 

Deduct  the  part  paid  by  premium  reserve 328,217.49 

(2)  Net  death  or  insurance  claim 645,475.51 

Exact  ratio  of  (i)  to  (2) 44.2  per  cent. 

"  An  inspection  of  these  figures  is  sufficient  to  show  the  prin- 
ciple involved,  which  is  simply  to  distinguish  INSURANCE  from  IN- 
VESTMENT expenses,  so  that  it  may  be  seen  that^  each  branch  of 
business  has  been  conducted  with  due  economy." 

"Under  ordinary  circumstances,  INSURANCE  EXPENSES  ap 
preaching  the  full  value  of  insurance  furnished,  or  amount  of 


OF    LTFK    IXSTRANCE.  61 

insurance  claims  paid,  should  be  regarded  as  extravagant ;  and 
INVESTMENT  EXPENSES  so  large  as  to  defeat  the  realization  of  a 
fair  rate  of  interest  on  investments  should  also  be  so  regarded.'* 

This  new  test  is  further  illustrated  by  the  company,  as 
follows: 

4 'This  company's  ratio  of  gross  expenses  to  gross  income  for 
1882  was  12.7  per  cent.,  and  to  the  mean  amount  of  its  policies 
in  force,  0.57  per  cent.  The  reader  will  at  once  perceive  that 
these  figures  convey  no  conclusive  or  practical  idea  to  him,  such 
as  he  is  given  when  he  is  informed  that  the  INSURANCE  EXPENSES 
bear  a  certain  proportion  to  the  INSURANCE  CLAIMS  PAID.  Ex- 
penses may  be  incurred  by  a  company  amounting  in  a  given  year 
to  more  than  100  per  cent,  of  the  insurance  claims  paid,  or  real  in- 
surance service  rendered  by  it,  in  the  same  year,  which,  of  course, 
would  be  highly  extravagant,  and  yet  the  extravagance  might 
escape  detection  in  a  comparison  with  income,  or  the  amount  of 
policies  in  force  ;  for  the  amount  of  expenses,  notwithstanding 
their  extravagance,  would  still  be  far  below  either  of  these 
amounts." 

In  illustration  of  the  unreliability  of  the  ratio  of  gross  ex- 
penses to  gross  receipts  or  premium  income,  as  a  test  of  the 
economy  of  one  Life  Insurance  Company  as  compared  with 
another,  the  leader  is  referred  to  the  official  report  of  the  Insur- 
ance Commissioner  of  Massachusetts,  Jan.  1,  1874,  pages  xxxii  to 
xxxvi,  inclusive.  In  the  example  there  cited,  by  a  skillful  mani- 
pulation of  figures,  the  ratio  of  expenses  to  gross  receipts  was 
reduced  from  14.33,  the  correct  ratio,  to  8.76  per  cent.;  and  the 
ratio  of  expenses  to  premium  receipts  was  reduced  from  20. 16, 
the  correct  ratio,  to  10.6  per  cent. ! 

Growth  of  Life  Insurance.— In  the  past  two  decades 
there  has  been  a  wonderful  expansion  in  life  insurance  as 
transacted  by  American  legal  reserve  companies.  At  the 
close  of  1879  the  companies  reporting  to  the  New  York  In- 
surance Department  showed  assets  of  $411,555,247;  an  annual 
income  of  $77,829,030;  payments  to  policyholders,  $57,399,971; 
new  business,  $167,865,390,  and  total  insurance  in  force, 
$1,439,961,165.  Only  a  few  small  companies  did  not  report 
to  the  Department  at  that  time,  and  their  figures  would  not 
materially  change  the  totals.  The  accompanying  table  shows 
the  standing  of  all  United  States  companies  at  the  close  of 
1889,  also  at  the  close  of  1899,  while  additional  columns  show 
the  increases  for  the  last  decade,  together  with  the  aggre- 
gates for  the  ten  years: 


62  THE    THREE    SYSTEMS 

GROWTH  OP  LIFE  INSURANCE. 


1899. 

1889. 

Increase  in 
10  Years, 
(1890-99) 

Aggregates 
for  10  Years. 
(1890-99.) 

Number  of  companies  

69 
$13,325,728 

57,683,670 
227,937,666 
6,2*0,858 

50 

$8,028,150 

33,437,579 
103,808,930 
2,921,803 

19 

$5,297,578 

24,246,091 
124,1*8,736 
3,229,055 

Capital  stock..  

INCOME. 

$414,470,664 
1,707,719,680 
39,276,287 

2,161,466,631 
461,967,707 
49,232,953 
19,116,123 

530,316,783 
2,691,783,414 

718,359,581 
106,991,404 
25,561,272 

217,393,829 
165,861,013 

Renewal  premiums  

Received  for  annnities 

Total  premium  income  
Dividends,  interest,  etc     _  . 

291,842,264 
61,039,137 
7,450,525 
5,036,136 

140,168,312 
31,471,298 
2  566,029 
2,037,220 

36,074.557 

151,673,952 
29,567,839 
4,884,496 
2,998,916 

Received  for  rents            . 

All  other  receipts 

Total  int.  and  other  income. 
Total  income  

EXPENDITURES. 
Paid  for  death  losses 

73,525,798 

37,451,241 

365,368,062 

96,219,587 
15,379.675 
3,684,673 

23,365,735 
21,368,316 

176,242,859 

44,866,684 
9,092,172 
1  ,539,793 

12,420,282 
14,130,598 

189,125,193 

51,352,903 
6,287.503 
2,144,880 

10,945,453 

7,237,718 

Paid  for  matured  endowments 

Paid   for    surrendered,   lapsed 
and  purchased  policies 

Dividends  to  policy  holders  

Total  payments  to  policyh'rs 
Dividends  to  stockholders  
Commissions,  salaries  and  trav- 
eling expenses  of  agents  
Medical  fees,  salaries  and  other 
charges  of  employees  

159,987,686 
826,566 

56,234,846 

11,857,966 
21,389,047 

82,049,529 
475,760 

24,165,851 

5,037,767 
9,176,328 

77,938,157 
350,806 

32,068,995 

6,820,199 
12,212,719 

1,232.167,099 
7,583,608 

388,718,218 

83,790,962 
151,758,898 

Total  expenses  of  managem't 
Total  expenditures 

90,308,435 

38,855,705 

51,452,730 

631,851,686 

250,296,121 
115,071,941 

1,595,208  408 
10,664,022 

1,322,485,263 
9,169,441 
1,116,922 
3,211,405 

120,905,235 
55,337,624 

714,469,944 
5,412,650 

616,303,271 
3,386,557 
217,809 
1,110  023 

129,390,887 
59,734,306 

880,738,464 
5,251,372 

706,181,99- 
5,782,884 
899,113 
2,101,382 

1,864,018^5 
827,764,629 

Excess  of  income  over  expen.. 
Total  admitted  assets 

Items  not  admitted  

LIABILITIES. 
Reserve  (4  ppr  cent)....     .... 



Losses  and  claims  not  paid  
Claims  resisted 

All  other  liabilities 

29,890,912 

1,365,873,943 
229,334,465 

1,324,041,326 
146,550,821 
1,177,490,505 
4,379,066,158 

3,250,002 

6*1,267,662 
90,202,282 

803,887,518 
134,861,583 
669,025,935 
2-304246,898 

26,640,910 

Total  liabilities 

741,606,281 
139,132,183 

520,153,808 
11,289,238 
508,864,570 
2074819,260 

Surplus  to  policyholders  

POLICY  ACCOUNT. 
New  business  written     ... 

10,015,642,662 
1,542,873,646 
8,472,769,016 

New  business  not  taken  

New  business  actually  paid  foi 
Whole  life  policies  in  force  ... 

Endowment  policies  in  force.. 
All  other  policies  in  force  

Total  insurance  in  force  
Industrial  business  written  
Industrial  insurance  in  force.. 

1,460,417,893 
642,039,912 

754,312,387 
158,777,151 

706,105,50C 
483,262,761 



6,481,523,963 
519,380,207 
1,292,756,042 

3217336,436 
201,977,843 
365,841,267 

3264187,527 
317,402,364 
926,914,775 

3,663,463,051 

OF  LIFE  INSURANCE.  63 


CHAPTER  VII. 


THE  LETEL  PREMIUM  SYSTEM. — ITS  DISTINGUISHING  CHARAC- 
TERISTICS.— REQUISITES  FOR  SOUNDNESS  AND  PERMANENCY. — 
ANALYSIS  OF  A  PREMIUM. — THE  RESERVE  ELEMENT. — THE 
MORTALITY  ELEMENT.— THE  EXPENSE  ELEMENT.— SOURCES 
OF  DIVIDENDS. 

SYSTEMS  OF  LIFE  INSURANCE. 

Three  systems  of  Life  Insurance  are  operated  in  this  coun- 
try under  the  protection  of  law.  They  are  The  Level  Premium 
System,  sometimes  called  'Old  Line,"  and  which  includes 
the  companies  transacting  industrial  insurance;  The  Natural 
Premium  System,  which  may  be,  and  often  is,  carried  on  as 
incidental  to  the  Level  Premium  System,  and  The  Assess- 
ment System.  This  latter  has  passed  through  many  stages 
since  the  first  edition  of  this  work  was  issued,  one  outcome 
of  which  has  been  the  so-called  Stipulated  Premium  System, 
which,  while  calling  for  a  specified  premium  in  advance,  never- 
theless retains  the  right  to  assess  should  circumstances  war- 
rant such  action.  Stipulated  Premium  Insurance  is,  therefore, 
more  nearly  allied  with  the  assessment  system  than  either  of 
the  other  two,  and  is  treated  accordingly  in  these  pages. 
These  are  discussed  in  the  following  pages  in  the  order  named. 

1.     The  Level  Premium  System. 
DISTINGUISHING  CHARACTERISTICS  : 

1.  The  premium  is  required  to  be  paid  in  advance. 

2.  The  contract  between  the  company  and  the  insured  is 

called  a  "policy." 

3.  The  policy  always  designates  a  definite  sum  to  be  paid 

by  the  company  to  the  beneficiary,  or  beneficiaries, 
named  therein,  subject  in  some  cases  to  the  right  of 
the  insured  to  change  the  beneficiary. 

4.  The  premium  is  a  ''level  premium";  that  is,  it  is  the 

same  from  year  to  year,  during  the  premium  paying 
period,  unless  reduced  by  dividends. 


64  THE    THUKK    SYSTEMS 

5.  The  policy-holder  is  never  insured  for  the  full  face  value 
of  his  policy  and  additions.  His  insurance  is  only 
for  a  sum  equal  in  amount  to  the  difference  of  these 
and  their  reserves.  In  other  words,  the  company  has 
at  risk  only  the  difference  between  the  face  of  the 
policy  and  the  reserve  accumulated  thereon. 

REQUISITES  FOR  SOUNDNESS  AND  PERMANENCY. 

0.— The  premium  must  be  based  on  safe  a  sumptions 
of  future  mortality,  interest  and  expenses. 

To  illustrate.— Let  it  be  required  to  make  an  annual  premium, 
at  age  40,  for  $1,000  of  insurance,  on  the  Ordinary  Life  Plan, 
basing  it  on  the  Actuaries'  Table  of  Mortality  and  4  per  cent,  in- 
terest. It  is  first  assumed  that,  of  the  78,653  persons  living,  at 
age  40,  at  the  beginning  of  the  year,  815  will  be  dead  at  the  end 
of  the  year,  and,  also,  that  the  number  living  and  dying  every 
year,  thereafter,  will  be  as  represented  in  the  table.  Theassump 
tion  is  that  the  future  mortality  of  the  Company  will  be  as  thus 
represented  and  this  assumption  is  regarded,  by  all  com- 
petent actuaries,  the  world  over,  as  a  perfectly  safe  one.  It  is 
also  assumed  that  4  per  cent,  compound  interest  will  be  received, 
by  the  company,  on  the  reserve  accumulations  cf  the  policy,  and 
this  is  also  regarded  as  a  safe  assumption.  On  these  assump- 
tions of  future  mortality  and  interest,  by  a  process  not  necessary 
to  explain  here,  the  net  annual  premium  is  found  to  be  $23.68. 
It  is  then  assumed  that  $7.89,  annually,  will  be  a  safe  contribu- 
tion for  expenses.  Adding  these  t\vo,  the  result  is  $31.57,  which 
is  the  gross  annual  premium,  at  age  40,  for  $1,000  of  insurance, 
during  life.  The  assumption  of  future  expenses  is  entirely  arbi- 
trary and  varies  writh  different  companies,  ranging  from  20  to 
40  per  cent,  of  the  net  premium. 

b. — The  Company  must  have  in  hand,  from  year  to 
year,  the  accumulations  of  reserve  provided  by 
law,  safely  invested  in  securities  earning1  a  rate 
of  interest  not  less  than  that  assumed  in  making- 
the  premium.  If  a  higher  rate  be  realized,  a  divi- 
dend can  be  paid. 

To  illustrate. — Suppose  that  the  insured  is  40  years  old  at  the 
beginning  of  the  first  policy  year;  that  the  policy  is  for  $1,000, 
Ordinary  Life,  and  that  the  premium  is  based  on  the  Actuaries' 
Table  of  Mortality,  and  4  per  cent,  interest.  The  net  annual 
premium  is  $23.68,  and  it  is  also  the  required  legal  reserve,  at 
this,  the  beginning  of  the  first  year;  but  it  gradually  diminishes 
until,  at  the  end  of  the  year,  it  is  only  $14.41.  The  difference  be- 
tween the  legal  reserve  at  the  beginning,  and  at  the  end  of  the 


OF  LIFE  INSURANCE.  65 

year, — $9.27 — ,  is  supposed  to  have  been  used  in  payment  of 
death  claims.  At  the  beginning  of  the  second  policy  year,  after 
the  premium  for  the  year  has  been  paid,  the  net  annual  premium, 
— always  $23.68 — ,  is  added  to  the  legal  reserve  at  the  end  of  the 
first  policy  year,  $14.41,  making  $38.09,  which  is  the  required 
legal  reserve  at  the  beginning  of  the  second  policy  year.  This, 
also,  as  during  the  first  year,  gradually  diminishes,  until,  at  the 
end  of  the  year,  it  is  $29.31,  which  is  the  legal  reserve  at  the  end 
of  the  second  policy  year  ;  and  so  on.  It  will  be  noticed  that  the 
legal  reserve  at  the  end  of  any  policy  year  is  always  larger  than  it 
was,  at  the  end  of  the  last  preceding  year;  and,  also,  that  the  re- 
serve, at  the  end  of  any  policy  year  added  to  the  uniform  net 
annual  premium,  at  the  age  when  the  policy  was  issued,  gives  the 
legal  reserve  at  the  beginning  of  the  next  policy  year.  At  the 
end  of  the  first  policy  year,  as  has  been  shown,  the  legal  reserve 
is  $14.41;  at  the  end  of  the  second  policy  year  it  is  $29.31,  gradu- 
ally increasing  from  year  to  year,  until  at  the  age  of  100— in  case 
of  a  life  policy,  based  on  the  Actuaries'  Table  of  Mortality — it  is 
equal  to  the  face  value  of  the  policy. 

c — Good  Management. 

Under  the  Level  Premium  System  the  larger  and  more  promi- 
nent companies,  both  in  this  and  i:i  foreign  countries,  are  doing 
business.  For  convenient  illustration,  let  it  be  assumed  that  a 
policy  of  $10,000,  Ordinary  Life  plan,  annual  premium  $264.90, 
has  been  issued  on  a  life  at  age  35.  This  premium,  the  first 
year,  is  composed  of  the  following  elements,  premising  that  it  is 
based  on  the  Actuaries'  Table  of  Mortality,  and  four  per  cent, 
interest: 

1.  The  Reserve  Element $110.39 

2.  The  Mortality  Element 88.27 

3.  The  Expense  Element 66.24 


Gross   Premium $264.90 


The  Reserve  Element. — Upon  payment  of  the  first  annual 
premium  of  a  Level  Premium  Policy,  insurance  law  and  mathe- 
matics require  that  a  part  of  it  shall  be  invested  by  the  company 
and  compounded,  annually,  at  a  certain  rate  of  interest — usually 
four,  or  four  and  one  half  per  cent. — until  the  policy  becomes  a 
claim  by  death  or  maturity.  Then  it  is  applied  in  part  payment 
of  the  claim.  A  part  of  every  succeeding  year's  premium  is 
also  required  to  be  thus  invested.  The  accumulation  of  these 
investments  is  technically  called  "the  reserve."  This  reserve  be- 
comes larger  and  larger  the  longer  the  policy  remains  in  force, 
until  it  equals  in  amount  the  face  value  of  the  policy,  at  age  96 
or  100,  if  a  life  policy  ;  or,  at  the  end  ot  the  endowment  term,  if 


66  THE   THREE   SYSTEMS 

an  endowment  policy.  A  Level  Premium  Company,  not  having 
in  hand  the  reserve  prescribed  by  the  state  from  which  it  received 
its  charter  is  not  solvent,  and,  when  it  would  enter  other  states 
for  business  it  must  comply  with  the  reserve  laws  of  those  states. 

The  reserve  should  not  be  confounded  with  surplus.  It  is  not 
surplus.  It  may  produce  surplus,  as  will  be  seen  further  on.  The 
reserve  can  be  used  for  no  purpose  whatever  while  the  original 
policy  is  in  force,  except  for  accumulation.  If  a  note  has  been 
given  in  part  or  full  payment  of  a  premium,  it  is  a  part  of  the 
reserve.  If  a  policy  were  to  be  sold,  to  the  company  or  another 
party,  the  reserve,  at  date  of  sale,  indicates  its  cash  value.  If  the 
original  policy  were  to  be  exchanged  for  a  similar,  smaller  one,  a 
paid-up,  one  upon  which  further  payment  of  premiums  would 
not  be  required,  the  reserve  determines  the  amount  of  such 
paid-up.  It  would  be  what  the  reserve  would  pay  for  at  your 
then  age,  according  to  the  rules  of  the  company. 

By  referring  to  Table  No.  19,  it  will  be  seen  that  the  reserve 
on  the  assumed  policy,  at  the  end  of  the  first  year,  is  $114.81, 
and  at  the  end  of  the  65th  year,  $10,000.  If  the  policy  were  for 
a  different  amount  ;  or,  for  the  same  amount  at  a  different  age  ; 
or,  in  general,  if  the  age,  kind  or  amount  of  policy,  either  or  all 
of  these  were  different  in  any  respect,  then  the  reserve  would  be 
different.  It  is  assumed  that  the  reserve  on  this  policy  will  earn 
four  per  cent,  compound  interest  ;  that,  during  the  first  policy 
year,  $88.27  will  be  used  in  payment  of  death  claims,  and  $66.24 
for  expenses  in  each  and  every  year.  If  these  assumptions 
be  realized,  no  more  and  no  less,  and  no  dividends  or  profits 
accrue  from  other  sources  to  reduce  the  premiums,  then 
the  insured  will  pay  the  Level  Premium  of  $264.90,  every 
year,  during  life.  Thus  paying,  for  the  whole  term  of  life, 
he  will  be  insured,  not  for  $10,000,  but  as  follows  :  At  the  end  of 
the  first  policy  year,  $9,885.19  ;  at  the  end  of  the  tenth  year, 
$8,665.88  ;  at  the  end  of  the  fifteenth  year,  $7,857.00  ;  at  the  end 
of  the  thirtieth  year,  $5,153.62,  and  so  on,  for  a  decreasing 
amount,  year  after  year,  until,  at  the  end  of  the  sixty-fifth  year, 
at  the  age  of  100,  he  will  have  no  insurance,  as  the  reserve  will 
then  just  exactly  equal  the  face  value  of  the  policy.  It  is  a  very 
remarkable  characteristic,  therefore,  of  "The  Level  Premium 
System  ",  that  a  policy-holder  is  never  insured  for  the  full  face 
value  of  his  policy  and  additions  !  His  insurance  is  only  for  a 
sum  equal  in  amount  to  the  difference  of  these  and  their  re- 
serves, and  this  difference  is  the  amount  which  the  company 
insuring  him  is  said  to  have  at  risk. 

Thirty-four  Level  Premium  Life  Companies  reported  to  the 
Massachusetts  Insurance  Department  December  31,  1899.  Ac- 
cording to  their  sworn  statements,  in  these  reports,  their  net 
total  assets  amounted  to  $1,540,686,885.  Their  reserves 
amounted  to  $1,267,263,247!  The  reserves,  therefore,  consti- 
tuted over  eighty-two  per  cent,  of  their  assets!  ! 


OP  LIFE   INSURANCE.  67 

Amzi  Dodd,  president  of  THE  MUTUAL  BENEFIT  LIFE  IN- 
SURANCE COMPANY,  of  Newark,  New  Jersey,  one  of  the  largest 
and  oldest  Level  Premium  Companies  in  the  United  States,  in  his 
Annual  Report,  Jany.  1,  1883,  says,  with  reference  to  the  reserve 
accumulations  of  companies,  as  follows: 

"  In  regard  to  this  fund  a  few  explanatory  words  may  be  use- 
ful. Each  policy  is  credited  on  the  company's  books  with  a  sepa- 
rate reserve,  according  to  its  age,  kind  and  amount.  It  arises 
from  the  simple  circumstance  that  the  risk  of  death  (and,  there- 
fore, the  cost  of  insurance)  increases  with  each  year  of  life, 
while  the  premium  which  is  paid  on  the  policy  differs  in  amount 
from  the  cost  of  insurance.  Out  of  1,000  persons,  living  at  the 
age  of  35,  our  American  Experience  Table  of  Mortality  shows 
that  nine  will  die  in  the  ensuing  year.  Out  of  1,000  living  at  the 
age  of  45 1  eleven  will  die  ;  out  of  1,000,  at  55,  eighteen;  out  of 
1,000,  at  65,  forty;  out  of  1000,  at  70,  sixty -two  ;  out  of  1,000,  at 
80,  one  hundred  and  forty -five  ;  at  85,  two  hundred  and  thirty- 
six;  at  90,  four  hundred  and  fifty  four  ;  at  92,  six  hundred  and 
thirty -five  ;  at  94,  eight  hundred  and  fifty  seven  ;  at  95,  one  thou 
sand — that  is  to  say,  by  the  table,  life  is  not  extended  beyond  96. 

"From  the  above  figures  it  appears  how  the  cost  of  insurance 
increases  yearly.  This  increasing  cost  would  be  the  natural 
premium.  For  the  sake  of  convenience,  the  sum  ordinarily 
agreed  to  be  paid  in  each  year,  is  different,  and  is  called  the  arti- 
ficial premium.  During  many  years  after  the  policy  is  issued, 
the  artificial  premium  is  greaier  than  the  natural,  and  in  after 
years  it  is  less.  In  case  of  a  policy  issued  at  the  age  of  35,  the 
artificial  premium  is  greater  than  the  cost  of  insurance  till  the  in- 
sured reaches  the  age  of  56.  After  that  age  it  grows  rapidly  less. 

"Out  of  this  state  of  things  arises  the  whole  matter  of 
reserves,  so  fundamental  and  so  much  discussed  in  Life  Insur- 
ance. Simple  as  it  is  when  stated,  it  is  remarkable  how  often  it 
is  imperfectly,  or  obscurely  conceived.  If  the  policy  contract, 
instead  of  calling  for  the  same  premium  each  year,  should  call  for 
the  gradually  increasing  natural  premium,  there  would  be  no 
need  of  reserves  or  accumulated  funds.  The  Company  and  its 
members  would  do  business  on  the  rule  of  "pay  as  you  go." 
The  policy-holder  would  get  yearly  the  equivalent  of  his  money 
paid.  But  under  the  system  almost  universally  in  use  he  pays 
largely  in  advance,  and  the  Company  holds  the  money  to  offset 
against  insurance  in  after  years,  when  the  insured  does  not  wish 
to  be  called  on  for  larger  payments.  The  reserve  fund  thus  aris- 
ing is  sometimes  called  the  wealth  of  Life  Insurance  Companies. 
It  is  obviously  not  such  ;  but  a  debt  from  the  corporation  to  its 
members  :  a  great  trust  fund  confided  to  the  managers. 

"  The  foregoing  will  serve  to  indicate  several  points  to  which 
only  a  brief  reference  need  now  be  made  :  Firstly—The  para- 
mount importance  of  keeping  an  ample  reserve  fund  securely  in- 
vested. It  is  vital  to  the  fulfillment  of  the  company's  contracts 
with  its  members.  Secondly — Why  it  is  that  a  company  should 
make  an  equitable  allowance  for  the  value  of  a  policy  when  the 
holder  can  no  longer  pay  premiums,  or  from  any  cause  discon- 
tinues them.  The  company  has  in  its  hands  a  reserve  for  the 
policy,  the  most  of  which  it  can  return  either  in  cash  or  in  the 
form  of  insurance,  without  injury  to  its  other  members  or  policy- 
holders.  The  reserve  is  held  for  the  future  needs  of  the  policy, 
and  when  such  needs  cease  to  exist  a  fair  return  can  be  made." 

The  Mortality  Element .  —The  name  sufficiently  indicates 
its  use.  In  the  premiums  under  analysis,  it  is  $88.27  the  first 


68 


THE   THREE   SYSTEMS 


year,  and  is  the  maximum  amount  chargeable  to  the  insured, 
in  that  year,  as  his  contribution  to  the  death  fund.  Some- 
times the  death  rate  is  in  excess  of  that  assumed,  and  the  ex- 
pense element,  or  loading,  is  then  drawn  upon  to  make  up  the 
deficiency. 

Column  (3),  Table  No.  19,  shows  the  amount  of  insurance, 
from  year  to  year,  that  the  company  has  at  risk  on  the  assumed 
poiicy.  It  is  at  all  times  the  excess  of  the  face  value  of  the 
policy  over  the  reserve  in  hand.  When  1he  insured  dies,  this  ex- 
cess or  amount  at  risk  is  paid  from  the  Mortality  Elements  of  the 
premiums  of  surviving  policy  holders.  To  illustrate,  suppose 
death  occurs  at  the  end  of  the  tenth  policy  year.  The  reserve  is 
$1,334.12.  This  lacks  $8,665.88  of  paying  the  $10,000.  This  de- 
ficit, therefore,  must  be  paid  from  the  Mortality  Elements  of  the 
surviving  policy-holders'  premiums,  as  stated  before. 

According  to  the  Actuaries'  Table  of  Mortality  the  cost  of  in- 
surance, at  age  35,  is  only  $9.29  for  each  $1,000.  At  age  50,  it  is 
$15.94  ;  at  age  60,  it  is  $30.34  ;  at  age  70,  it  is  $64.93  ;  at  age  80, 
it  is  $140.41  ;  at  age  90,  it  is  $323  73  ;  and  at  age  99,  it  is  $1,000 
for  $1,000  of  insurance  !  From  this  it  is  seen  that,  if  no  accumu 
lations  were  held  in  reserve,  under  The  Level  Premium  System, 
the  death  rate  would  eventually  be  so  large  that  the  entire  pre 
mium, — the  three  elements  combined — ,  would  be  insufficient  for 
the  payment  of  death  losses,  alone,  saying  nothing  of  expenses. 
But  the  constantly  increasing  reserve  is  continually  diminishing 
the  amount  of  insurance  at  risk,  so  that  the  decrease  of  risk  neu- 
tralizes the  increase  of  mortality. 

The  Expense  Element.— "The  net  premium/'  says  Gusta- 
vus  W.  Smith,  "is  the  amount  that  will,  on  the  designated  data 
— nanr-ly,  rate  of  interest  and  table  of  mortality — exactly  effect 
the  insurance." 

"Loading" — The  Expense  Element,—,  says  Elizur  Wright, 
"is  the  addition  which  is  made  to  the  'net  premium/  to  provide 
for  commissions  and  other  working  expenses,  and  for  occasional 
excesses  of  mortuary  loss." 

In  the  premium  under  analysis  the  expense  element  is  $66.24. 
This  is  the  assumed,  maximum,  annual  charge  against  the  in- 
sured for  expenses  or  unforeseen  contingencies.  By  adding 
the  reserve  and  Mortality  Elements  of  any  premium,  we  ob- 
tain what  is  called  the  "net  premium,"  which,  in  the  example 
selected,  is  $198.66;  then,  by  adding  The  Expense  Element, 
we  obtain  the  Gross  Premium  of  $264.90.  Net  premiums 
— age,  kind  and  amount  of  insurance  being  the  same — are 
the  same  in  all  Level  Premium  Companies  that  base  their 
rates  on  the  same  Mortality  Table  and  rate  of  interest;  but 
the  Gross  Premiums  are  most  always  different,  because  of 
the  difference  of  the  Expense  Elements.  Of  two  Level 


OP  LIFE  INSURANCE.  fi9 

Premium  Companies,  one  has  been  charging  a  Gross  Premium  of 
$313.00,  and  the  other  only  $266.10,  for  $10,000  of  insurance, 
life  plan,  age  40,  the  first  year.  Their  net  premiums  are  the 
same,  but  the  Expense  Element  of  the  former  is  $89.46,  while 
that  of  the  latter  is  only  $42.56.  The  dividends  at  the  end  of  the 
first  year,  if  used  in  part  payment  of  premiums,  would  possibly 
reduce  the  second  year's  payment  in  each  to  about  the  same 
amount,  and,  after  a  few  years,  the  higher  price  company,  at  first, 
might  prove  to  be  less  expensive  in  the  long  run. 

The  Reserve  and  Mortality  Elements  are  determined  by  care 
ful  mathematical  calculations,  while  the  Expense  Element,  or 
"  loading/'  as  it  is  technically  called,  is  entirely  arbitrary . 


SOURCES    OF    DIVIDENDS. 
In  the  Level  Premium  System. 

1.— Dividends  arising1  from  having  received  a 
higher  rate  of  interest  on  the  reserves  than  that  as- 
sumed.—It  has  been  stated  that  the  reserves  of  every  company 
must  be  invested  and  compounded  annually,  at  a  certain  rate  of 
interest,  fixed  by  law.  In  the  example  selected,  we  assume  the 
rate  to  be  four  per  cent.  If  only  four  per  cent,  be  realized,  there 
can  be  no  dividends  from  this  source.  But,  suppose,  for  illustra- 
tion, that  the  reserve  earns  six  per  cent,  compound  interest,  or 
two  per  cent,  more  than  that  assumed.  By  referring  to  col.  (5), 
table  No.  19.  it  will  be  seen  that  this  gives  a  dividend,  end  of  1st 
year,  of  $2.30;  end  of  5th  year,  $12.26;  end  of  10th  year,  $26.68; 
end  of  15th  year,  $42.86;  end  of  20th  year,  $60.26;  end  of  25th 
year,  $78.50;  end  of  30th  year,  $96.92;  end  of  35th  year,  $114.64; 
end  of  40th  year,  $131.00;  end  of  45th  year,  $145.62;  and  at  the 
end  of  the  65th  year,  $200!!  Columns  (4),  (6),  and  (7)  show  what 
the  dividends  would  be  if  the  reserves  were  to  earn  five,  seven  or 
eight  per  cent,  compound  interest.  One  of  our  most  prominent 
Life  companies  realized  an  annual  average  of  eight  and  one- 
quarter  per  cent,  compound  interest  on  its  reserves,  from  1872  to 
1883;  but  in  1883  it  was  only  a  trifle  more  than  six  and  three 
fourths  per  cent.,  which,  although  much  reduced,  was  very  high 
in  comparison  with  that  of  some  other  older  companies.  Another 
company  that  received  seven  and  one-fifth  per  cent,  interest  on  its 
reserves  in  1873,  realized  Jess  than  five  per  cent,  in  1883!  This 
reduction  of  interest  has  but  little  effect  on  the  dividends  of  poli- 
cies that  have  been  in  force  only  a  few  years,  when  the  reserves 
are  comparatively  small;  but,  on  old  policies  with  large  reserves 
there  has  been  a  marked  reduction  of  dividends.  The  companies 
should  not  be  censured  as  it  could  not  be  avoided.  Agents  and 
solicitors  of  comparatively  young  companies  have  sometimes 
seized  upon  the  fact  of  this  large  reduction  of  dividends  on  old 


'0  THE   THREE   SYSTEMS 

policies  in  the  older  companies,  and  made  it  the  basis  of  severe 
and  unjust  criticism  by  comparing  recent,  with  former  dividends 
on  the  same  policies  before  interest  had  dropped. 

The  reserves  of  the  Level  premium  companies  doing  business 
in  Massachusetts,  as  shown  by  official  reports,  Dec.  31,  1899, 
amounted  to  $1,267,263,247.  If  only  five  per  cent,  interest  were 
realized  on  these  reserves,  the  dividends  resulting  therefrom 
would  amount  to  over  twelve  millions  of  dollars;  if  six  per 
cent,  were  realized,  the  dividends  would  be  more  than  twenty- 
five  millions  of  dollars;  and,  if  the  reserves  earned  seven  per 
cent.,  the  dividends  would  be  over  thirty-six  millions  of 
dollars! ! 

2.— Dividends  arising-  from  having-  experienced  a 
less  mortality  than  assumed.— The  mortality  element  of  a 
premium  is  the  annual   contribution  of  the  insured  for  the 
payment   of   death    losses.     In    the   premium   under    analysis 
it  is  $88.27  for  the  first  year.     If  it  be  not  all  used  for  that 
purpose,  the  unused  portion  will  be  returned  or  credited  to 
the  policy-holder  at  the  end  of  the  policy  year,  improved  by 
interest,  as  an  element  of  his  dividend  for  that  year.     Divi- 
dends from   this   source,   in   our  best   conducted   companies, 
where  extreme  care  has  been  exercised  in  the   selection  of 
sound  lives,   have  been  quite  large,   amounting   some  years 
to  twenty  or  even  thirty  per  cent,  of  the  assumed  mortality. 
So  long  as  the  actual  mortality,  among  the  members  of  a  com- 
pany, is  less  than  the  mortality  indicated  by  the  table  upon  which 
its  premiums  are  based,  there  will  be  a  constant  annual  surplus 
for  dividends  from  this  source.     If  a  company  be  National  in 
charucter,  with  its  business  sufficiently  large  for  a  safe  average, 
and  quite  evenly  distributed  over  the  whole  country,  there  need 
be    no  apprehensions  of  serious  trouble  from  epidemics,  wars, 
earthquakes,  etc.,  etc.     The  great  law  of  mortality  operates  with 
as  much  precision  as  the  laws  of  light,  heat,  electricity  and  gravi- 
tation. 

Several  years  ago  a  special  agent  of  a  New  York  company  was 
sent  on  business  to  one  of  its  General  Agencies  in  New  England. 
While  there,  the  General  Agent  remarked  that  he  had  one 
policy-holder  who  was  always  grumbling.  His  policy  was  for 
only  $1,000,  but  his  fruitful  imagination  was  constantly  conjuring 
up  something  that  might  possibly  happen  to  the  company  and  his 
policy  thereby  become  worthless.  Sometimes  it  was  one  thing, 
and  at  other  times,  another.  Just  at  that  time  he  was  fearful  that 
some  fatal  epidemic  might  sweep  over  the  country,  and,  if  not 
all,  a  veiy  large  percentage  of  the  policy-holders  of  his  company 
would  suddenly  die  and  the  company  thus  become  hopelessly 
insolvent.  The  general  agent  expressed  a  desire  that  the  special 
should  have  an  interview  with  this  troublesome  policy-holder. 


OP  LIFE  INSURANCE.  71 

An  interview,  therefore,  was  arranged,  and  in  a  few  hours  the 
special  agent  and  the  vexatious  policy-holder  confronted  each 
other  in  the  private  office  of  the  general  agent.  After  customary 
preliminaries,  the  policy-holder  said,  "What  are  the  assets  of 
your  company?  "  "  25  millions  of  dollars  "  was  the  reply.  "  "What 
amount  of  insurance  has  the  company  in  force?"  was  the  next 
question.  "165  millions  of  dollars"  promptly  responded  the 
special.  "Now,  sir/'  rejoined  the  policy-holder,  "suppose  all 
your  policy-holders  were  to  die  before  to-morrow  morning,  how 
could  the  company  pay  165  millions  of  dollars,  when,  according 
to  your  statement,  just  made,  it  has  only  25  millions  of  dollars  to 
pay  it  with?"  The  special  agent  replied,  "1  will  answer  your 
questions  by  asking  another.  I  will  suppose  you  have  three  sons 
whose  ages  are  five,  ten  and  fifteen  years,  respectively,  and  that 
you  have  decided  to  make  a  permanent  investment  by  which  each 
of  these  sons  shall  receive,  at  age  21,  $1,000  in  cash.  Your 
youngest  son  will  be  21  in  16  years;  the  next  older,  in  11  years, 
and  the  oldest  son  in  six  years.  Assuming  that  money  will  earn 
four  per  cent,  compound  interest,  you  find  that  $533.90  will 
amount  to  $1,000  in  sixteen  years;  $649.60  will  amount  to  $1,000 
in  eleven  years,  and  $790.30  will  amount  to  1,000  in  six  years. 
You  make  your  investments,  accordingly,  and  you  have  the  best 
of  reasons  for  believing  that  each  of  these  sons  will  receive  the 
$1,000  thus  provided  for  at  the  age  of  21.  You  know  that  six- 
teen years  must  elapse  before  the  youngest  son  will  be  21;  the 
next  older  will  not  be  21  until  the  end  of  eleven  years,  and  it  wrill 
be  six  years  before  the  oldest  son  will  be  21.  But  what  if  all 
three  of  these  sons  were  to  become  21  years  old  to-morrow?  Your 
investments  would  not  pay  the  $3,000,  would  they?  If  all  our 
policy-holders  were  to  die  before  to  morrow  morning,  it  would 
be  a  phenomenon  as  exceptional  as  if  your  three  sons  were  to 
become  21  years  old  to-morrow.  In  that  event  our  25  millions  of 
dollars  would  not  pay  the  165  millions  of  dollars  any  more  than 
your  investments  would  pay  the  $3,000.  One  event  is  as  likely 
to  occur  as  the  other." 

3.— Dividends  arising  from  the  expenses  having- 
been  less  than  those  assumed. — If  the  expense  element  of 
a  premium,  which,  in  the  example  for  illustration  is  $66.24,  is  not 
all  needed  for  the  purposes  indicated,  the  balance  is  paid  back 
or  credited  to  the  insured,  with  interest  earned,  at  the  end 
of  every  policy  year,  as  an  element  of  his  dividend.  In  look- 
ing over  the  records  of  the  companies  for  a  series  of  years, 
it  will  be  seen  that  their  expenses  have  averaged  from  about 
$5.00  to  $15.00  per  annum  for  each  $1,000  of  insurance  in 
force.  The  lower  averages,  with  rare  exceptions,  are  those 
of  the  older  companies  having  large  amounts  of  old  busi- 
ness on  their  books,  in  which  the  agents  have  no  renewal 
interest.  This  showing,  however,  is  to  some  extent  delusive. 
There  are  three  well-defined  periods  in  the  expense  of  every 


72  THE    THREE   SYSTEMS 

company's  business, — (i),  the  expense  of  procuring  new  busi- 
ness; (2),  the  expense  of  taking  care  of  it  after  the  first  year 
and  until  the  agents'  renewal  commissions  terminate;  (3),  the 
expense  after  the  renewal  commission  period.  If  our  insurance 
laws  would  require  every  company  to  report  its  expenses  during 
each  of  these  periods,  separately,  one  would  probably  be  better 
qualified  to  judge  more  accurately  of  the  comparative  merits  of 
the  companies,  in  this  respect. 

4.  Dividends  from  Lapses  and  Forfeitures.  A 
policy  is  said  "  to  lapse"  if  the  premium  is  not  j>aid  when  due. 
If  the  Company  accept  the  policy  afterwards,  upon  certificate  of 
health,  or  otherwise,  the  policy  is  then  known  as  a  "Restored 
Policy."  A  policy  is  "forfeited  "  when  one  or  more  of  its  con- 
ditions of  non  forfeiture  are  violated.  These  conditions  vary  in 
the  different  companies,  and  in  the  different  kinds  of  policies 
issued  by  the  same  company.  The  margins  made,  therefore, 
on  lapses  and  forfeitures,  depend  not  only  upon  the  company  that 
issued  the  policy,  but  also  upon  the  kind  of  policy  issued.  A 
policy,  in  some  companies,  may  lapse  and  not  l>e  forfeited;  or,  it 
may  be  forfeited  without  lapsing.  In  other  companies  a  lapsed 
policy  is  also  a  forfeited  policy,  until  restored,  or  a  paid-up  be 
issued  in  exchange.  Every  kind  of  a  policy  in  every  company 
will  lapse,  if  the  premium  be  not  paid  when  due;  but  the  conse- 
quences to  the  policy-holder,  of  the  lapse,  would  be  widely  different 
in  different  companies  and  in  different  forms  of  policies.  If  the 
lapsed  policy  is  a  Life  or  Endowment  Policy,  having  been 
in  force  two  or  three  years,  the  consequences  depend  entirely 
upon  the  policy  contract  of  the  company  that  issued  it.  If  in  a 
a  certain  class  of  companies,  it  may  be  restored — upon  giving 
certificate  of  health — ,  or  exchanged  for  a  smaller  paid-up,  if 
attended  to  within  a  limited  time;  or,  it  may  be  surrendered  for 
cash,  [f  in  another  class  of  companies  the  policy  would  be  con- 
tinued, so  long  as  the  dividend  accumulations,  if  any,  would  carry 
it,  at  the  orignal  premium  rate;  if  in  another  class,  the  lapsed 
policy,  itself,  would,  immediately,  without  notice  or  application, 
become  a  paid  up  for  a  smaller  amount  payable  when  the  original 
policy  would  have  been  ;  if  in  still  another  class,  it  wculd  be 
continued,  for  the  full  amount,  so  long  as  the  reserve  would  carry 
it,  at  single  payment  term  rate,  without  any  action  on  the  part  of 
the  insured,  and  so  on. 

The  conditions  and  consequences  of  forfeiture  are  as  multi- 
form as  are  those  of  lapses,  but  more  disastrous  to  the  insured, 
depending  upon  the  companies  selected.  Prompt  payment  of 
premium  is  not  always  a  safeguard  against  forfeiture.  Incorrect 
statements— intentional  or  otherwise,  material  or  immaterial — 
made  in  answer  to  questions  asked  in  the  application  for  insur- 


OP  LIFE  iNbUKANCE.  73 

ance,  sometimes  forfeit  the  policy,  although  in  modern  prac- 
tice the  incontestable  clause  debars  a  company  from  declaring 
such  forfeiture  except  within  a  period  of  from  one  to  three 
years,  or,  in  the  cases  of  some  companies,  during  the  lifetime 
of  the  insured.  Suicide  by  the  insured,  whether  sane  or  in- 
sane, voluntary  or  involuntary;  excessive  use  of  intoxicants; 
going  beyond  the  prescribed  limits  of  travel;  engaging  in 
certain  occupations,  etc.,  etc.,  are  forbidden  by  the  terms  of 
a  majority  of  the  companies'  policies  during  a  certain  number 
of  years  after  the  issuance  of  the  contract.  Most  policies 
provide,  however,  that  in  case  of  such  violations  of  their  terms 
the  company  will  be  liable  only  for  the  amount  of  the  reserve 
accumulated  at  time  of  forfeiture,  or  in  some  cases  the  sum 
of  the  premiums  paid.  The  tendency  of  the  modern  contract 
is  toward  greater  simplicity,  so  that  the  insured,  having  once 
been  accepted,  the  company  virtually  binds  itself  to  pay  the 
policy  on  the  sole  condition  that  the  premiums  have  been 
regularly  paid.  No  agent  has  authority  to  waive  a  lapse  or 
forfeiture,  so  that  when  it  occurs  the  entire  reserve  and  divi- 
dend accumulations  are  in  imminent  peril. 

5.  Dividends  from  Cash  Surrender   Values.— The 
expression.    '*  Cash   surrender  value,"   means,  practically,  this: 
If  a  company  were  to  offer    $500    in  cash,  for  a  policy,  that 
rtrould  be  the  cash  surrender  value  of  that  policy  in  that  company. 
In  another  company  it  might  be  $800,  or  even  $1,000!    The  cash 

surrender  values  of  policies  issued  by  companies  of  less  than 
half  a  dozen  states  are  regulated  by  law;  but,  with  these  ex- 
ceptions, the  cash  surrender  value  of  a  policy  is  whatever  the 
company  that  issued  it  offers  for  it.  It  is  now  generally  stip- 
ulated in  the  policy,  but  is  sometimes  left  an  open  question 
until  applied  for  by  the  policy-holder.  The  basis  of  cash 
surrender  values,  in  all  American  Companies,  is  the  reserve 
values. 

6.  Dividends  arising1   from   changes.     It  sometimes 
occurs  that  a  policy-holder,   after  having  been  insured  a  few 
years,  desires  to  change  his  policy  for  one  of  another  kind.     It 
may  be   an  Ordinary  Life  Policy  and  he  prefers  an  Endowment 
or  one  upon  which  all  the  premiums  may  be  paid  in  ten,  fifteen, 
or  twenty  years  ;  or,  he  may  wish  to  reduce  the  amount  of  his 
present  policy.     As  a  general  rule  any  such  change  is  attended 
with  more  or  less  loss  to  the  insured,  and  a  corresponding  profit 
to  the  company. 


74  THE    THREE    SYSTEMS 


CHAPTER  VIII. 


MODERN  LEVEL  PREMIUM  CONTRACTS. 

NUMEROUS  NEW  FORMS. — ELIMINATION  OF  RESTRICTIONS. — 
EXTENSION  OF  NON-FORFEITURE  PRINCIPLES. — INSTAL- 
MENT AND  CONTINUOUS  INSTALMENT  CONTRACTS. — IN- 
VESTMENT INSURANCE. 

Managers  of  the  several  life  insurance  companies  of  the 
United  States  during  the  past  twenty  years  have  devoted  a 
large  amount  of  time  and  labor  to  the  preparation  of  new 
forms  of  policies  designed  to  attract  the  insuring  public  by 
their  adaptibility  to  varying  circumstances.  Many  of  these 
forms  have  been  in  evidence  for  awhile,  and  then  been  with- 
drawn to  make  room  for  others  still  more  advantageous.  As 
in  every  other  line  of  business,  so  in  life  insurance,  only  the 
fittest  survive,  and  this  applies  to  contracts  as  well  as  to 
companies.  The  ordinary  forms  of  policy,  such  as  whole 
life,  limited  payment  life  and  endowments,  payable  either  at 
the  end  of  a  specified  period  or  on  attaining  a  certain  age, 
still  retain  their  popularity,  and  doubtless  will  continue  to 
comprise  the  great  majority  of  the  contracts  issued  annually 
so  long  as  life  insurance  shall  last.  The  improvements  in 
these  contracts  have  been  mainly  in  the  direction  of  brevity 
and  simplicity  of  language,  the  elimination  of  onerous  con- 
ditions and  the  virtual -placing  of  the  control  of  the  contract 
in  the  hands  of  the  policy-holder.  The  restrictions  as  to 
residence,  travel  and  occupation  have  now  been  so  modified 
as  to  leave  the  policy-holder  untrammeled  after  the  lapse  of 
a  comparatively  short  period,  while  in  some  cases  the  policies 
are  practically  unrestricted  from  the  date  of  issue.  The  sui- 
cide clause  now,  as  a  general  rule,  applies  for  not  more  than 
three  years  after  date  of  issue,  while  the  old  forfeiture  pro- 
vision for  the  excessive  use  of  intoxicants  or  narcotics  has 
almost  entirely  disappeared. 

It  is  in  the  direction  of  non-forfeiture,  however,  that  the 
most  improvement  has  been  made.  The  old  forms  of  poli- 


OF    LIFE    INSURANCE.  75 

cies,  Tontine  and  Non-Tontine  alike,  were  particularly  harsh 
on  those  policy-holders  who  failed  to  keep  up  their  premium 
payments.  Non-payment  of  premium  on  a  certain  day  for- 
feited the  contract,  and  the  policy-holder  was  left  at  the  mercy 
of  the  company  for  any  return  of  his  equity  in  the  contract. 
Non-forfeiture  laws  are  still  few  in  number,  and  some  of  them 
make  it  compulsory  on  the  policy-holder  to  apply  for  the 
surrender  value  within  a  certain  time,  but  in  this  case,  what 
legislation  has  neglected  competition  has  effected.  One  after 
another  the  life  insurance  companies  have  fallen  into  line 
and  recognized  the  rights  of  the  policy-holders  to  an  equita- 
ble surrender  value  after  the  payment  of  premiums  for  a  cer- 
tain number  of  years.  A  majority  of  the  companies  now 
offer  three  options  of  surrender  value,  one  of  which  is  auto- 
matic and  takes  effect  without  action  on  the  part  of  the  in- 
sured. These  three  options  are  the  stipulated  value  in  cash, 
or  in  paid-up  insurance,  or  in  extended  insurance,  one  of  the 
two  latter,  according  to  the  practice  of  the  several  companies, 
being  automatic.  A  few  companies  are  still  more  liberal  in 
their  non-forfeiture  regulations,  their  policies  providing  that 
they  cannot  lapse  so  long  as  there  is  an  amount  of  reserve 
standing  to  their  credit  sufficient  to  pay  a  quarterly  premium. 
Such  advances  with  interest  are  charged  against  the  policies, 
and  the  insured  have  the  option  at  any  time  of  paying  up  all 
or  part  of  the  advances,  thereby  restoring  the  value  of  the 
contracts  in  whole  or  in  part.  Another  improvement  is  the 
loan  feature  under  which  policy-holders,  after  the  lapse  of 
two  or  three  years,  may  borrow  on  the  security  of  their  con- 
tracts certain  sums,  in  most  cases  equal  to  the  reserve  on 
the  policies  at  the  end  of  the  existing  policy  year.  This 
feature  enables  many  a  policy-holder  to  continue  in  the  com- 
pany, whereas,  under  the  older  forms,  he  would  have  had  to 
drop  out  for  non-payment  of  premium.  The  object  of  the 
companies  in  granting  all  these  benefits  is  to  hold  the  policy- 
holder,  and,  although  premiums  are  due  promptly  on  the 
date  specified,  it  has  become  customary  to  grant  thirty  days 
of  grace  during  which  the  insurance  remains  in  full  force, 
subject  only  to  the  .deduction  of  the  premium  due,  with  in- 
terest, in  the  event  of  death  before  the  thirty  days  expire. 

Having  thus  summarized  briefly  the  liberalized  conditions 
of  the  policies  generally  it  is  desirable  to  call  particular  atten- 
tion, to  some  special  forms.  In  the  first  place  it  may  be  said 
that  the  introduction  of  the  deferred  dividend  forms  has  done 
much  to  popularize  life  insurance.  It  is  no  longer  a  case  of 
having  to  die  to  win,  but  the  prudent  man  may  so  adjust  his 
insurance  as  to  reap  the  whole  benefit  of  it  himself  when  the 


76  THE    THREE    SYSTEMS 

need  of  protection  for  his  wife  and  family  has  passed  away. 
By  taking  a  contract  with  a  ten,  fifteen,  or  twenty-year  de- 
ferred dividend  period  he  finds  at  the  end  of  the  time  selected 
a  number  of  options  presented  to  him  for  a  choice.  If  he 
still  needs  the  insurance  as  a  protection  it  is  there,  but  if,  on 
the  other  hand,  the  need  for  life  insurance  protection  has 
passed  away  and  ready  cash  will  suit  him  better,  the  cash  is 
at  his  disposal.  Or  he  may  provide  himself  with  an  annuity 
for  life  or  for  a  fixed  period  of  years,  or  if  none  of  these  suit 
him  some  one  of  various  combination  options  may  be  selected. 
In  short,  whatever  may  be  his  changed  circumstances  some 
option  will  suit  them. 

So  numerous  are  the  forms  of  policy  contract  now  offered 
to  the  public  that  extended  reference  to  all  is  impossible  in 
a  work  of  this  character,  but  some  are  particularly  deserving 
of  mention.  Instalment  policies  are  of  comparatively  recent 
origin,  and  they  answer  a  purpose  which  every  prudent  man 
can  deeply  appreciate.  The  sudden  placing  of  a  large  sum 
of  money  in  the  hands  of  a  widow  or  a  person  unacquainted 
with  the  investment  of  funds  has  often  resulted  in  heavy  loss, 
thereby  depriving  the  beneficiaries  of  that  protection  which 
the  husband  and  father  had  labored  so  hard  to  provide.  The 
instalment  policy  offsets  this  by  paying  only  a  certain  per- 
centage of  the  face  at  death  and  the  balance  in  equal  annual 
instalments,  extending  over  a  period  selected  by  the  insured 
at  the  time  of  taking  out  the  contract.  Thus,  a  $10,000  policy 
payable  in  twenty  annual  instalments  provides  $500  at  the 
death  of  the  insured  and  $500  per  annum  thereafter  for  nine- 
teen successive  years.  Should  the  beneficiaries  die  before 
all  the  instalments  have  been  paid  the  remaining  instalments 
will  be  paid,  as  they  fall  due,  to  the  heirs,  or  commuted  into 
a  lump  sum.  The  insured  generally  has  the  option  of  direct- 
ing that  the  policy  be  paid  in  a  lump  sum  instead  of  in  instal- 
ments, in  which  case  the  company  simply  computes  the  pres- 
ent value  of  twenty  successive  annual  instalments  at  date  of 
death  and  pays  the  beneficiary.  This  lump  sum  is,  of  course, 
less  than  the  face  of  the  policy,  as  the  question  of  interest 
during  the  time  the  money  would  be  in  the  hands  of  the  com- 
pany if  paid  in  instalments,  has  to  be  taken  into  account.  The 
instalment  feature  can  be  applied  to  any  ordinary  form  of 
contract,  and  many  companies  do  not  issue  special  instal- 
ment contracts,  but  simply  attach  a  proviso  to  the  regular 
forms  that  the  face  may  be  paid  in  equal  annual  instalments 
together  with  interest  on  unpaid  balances. 

Continuous  Instalment  policies  are  an  outgrowth  of  the 


OF    LIFE    INSURANCE.  77 

instalment  idea,  and  have  been  described  by  some  competent 
authorities  as  the  most  valuable  improvement  in  life  insur- 
ance practice  ever  devised.  A  continuous  instalment  contract 
provides  that  should  the  beneficiary  live  beyond  the  period 
during  which  the  specified  number  of  instalments  have  been 
paid,  the  company  will  continue  to  pay  the  annual  instalments 
so  long  as  the  beneficiary  shall  live,  thus  enabling  a  man  to 
provide  a  sure  and  certain  life  income  for  his  beneficiary. 
In  figuring  the  premiums  on  such  contracts  the  age  of  both 
the  insured  and  the  beneficiary  must  be  taken  into  account, 
for  it  is  obvious  that  a  beneficiary  aged  twenty  has  a  greater 
life  expectation  than  one  aged  forty.  On  endowment  con- 
tracts the  continuous  instalment  feature  works  out  particu- 
larly favorable.  For  example,  a  man  aged  twenty-five  takes 
out  a  twenty-year  endowment  policy  for  $10,000,  making  his 
wife,  aged  twenty,  the  beneficiary.  Assuming  that  he  is  living 
at  the  end  of  twenty  years,  the  company  immediately  begins 
paying  him  an  annual  income  of  $500,  and  continues  it  so 
long  as  he  lives,  whether  that.be  ten,  twenty  or  even  fifty  or 
more  years.  Should  he  die  after  receiving  one  or  more  in- 
stalments, or  even  before  the  end  of  the  twenty-year  endow- 
ment period,  and  his  beneficiary  survive  him,  the  company 
will  pay  her  the  instalments  so  long  as  she  may  live,  whether 
it  be  twenty  or  fifty  years.  Should  both  insured  and  bene- 
ficiary die  before  twenty  annual  instalments  have  been  paid, 
the  commuted  value  of  the  unpaid  instalments  is  payable  to 
the  estate.  By  these  continuous  instalment  contracts  the 
benefits  of  life  insurance  are  certain  both  to  the  insured  and 
beneficiary  to  the  utmost  possible  limit. 

Investment  Insurance. — Many  contracts  of  life  insurance 
nave  been  devised  with  the  idea  of  appealing  to  investors. 
To  this  class  belong  those  contracts  which  provide  for  an 
income  at  an  agreed  rate  of  interest  for  a  specified  number 
of  years,  at  the  end  of  which  time  the  face  value  of  the  con- 
tract becomes  payable.  The  investment  idea  is  emphasized 
by  calling  these  contracts  bonds,  and  their  safety  is  still  further 
emphasized  by  the  use  of  the  word  "gold."  A  twenty-year 
five  per  cent,  gold  bond  is  the  favorite  form  of  this  contract, 
and  it  is  issued  either  on  the  whole  life,  twenty-payment  life, 
or  twenty-year  endowment  form.  On  the  maturity  of  the 
contract,  by  death  or  otherwise,  the  company  issues  as  many 
thousand-dollar  bonds  as  the  face  of  the  contract  calls  for,  the 
principal  of  which  is  due  in  twenty  years,  and  on  which  five 
per  cent,  interest  is  paid  semi-annually  in  advance.  A  pur- 
chaser of  these  bonds,  therefore,  provides  a  five  per  cent,  in- 


78  THE    THREE    SYSTEMS 

come  for  his  beneficiaries  for  twenty  years  with  a  lump  sum 
at  the  end  of  the  period.  In  the  endowment  forms,  if  the  in- 
sured survive  the  endowment  period,  he  receives  the  income 
himself,  together  with  the  proceeds  of  the  bonds  at  maturity. 
In  view  of  the  increasing  difficulty  in  securing  good  invest- 
ments yielding  over  three  per  cent,  net,  these  so-called  gold 
bonds  and  investment  contracts  generally  offer  attractions  to 
investors. 


OF  LIFE  INSURANCE.  79 


CHAPTER    IX. 


NON-FORFEITURE  LAWS. 

THE  MASSACHUSETTS  NON-FORFEITURE  LAW  OF  1880. — LET- 
TERS AND  ANSWERS. — EXAMPLES  ILLUSTRATING  THE  LAW. 

In  the  original  edition  of  The  Three  Systems  the  author 
went  very  thoroughly  into  the  benefits  of  the  Massachusetts 
Non-Forfeiture  law,  passed  in  1880.  This  law  was  amended 
in  1887  and  again  in  1896,  and  by  a  bill  passed  in  1900  will 
be  entirely  supplanted  as  to  all  new  contracts  issued  on  and 
after  January  i,  1901.  As,  however,  the  old  law  still  applies 
to  existing  contracts,  and  is  of  considerable  historical  in- 
terest, the  data  is  retained  here,  being  followed  by  the 
amended  laws  of  1887  and  1896  and  the  new  law  of  1900. 

The  companies  doing  business  under  The  Level  Premium 
System  may  be  properly  grouped  into  the  following  classes  : 

CLASS  A. 

This  class  includes  all  the  Life  Companies  chartered  by  and 
doing  business  under  the  authority  and  supervision  of  the  com- 
monwealth of  Massachusetts.  They  are  distinguished  from  all 
other  companies  doing  business  in  America  because  of  "An 
Act  limiting  the  Forfeiture  of  Policies  in  Life  Insu- 
rance Companies,"  approved  April  23,  1880,  taking  effect  on 
the  fifth  day  of  March,  1881,  in  compliance  with  which  all  their 
policy  contracts  are  drawn.  The  law  is  given  in  full,  as 
follows: 

Public    Statutes,   Chap.     119,    Sections    161-166. 

Sect.  161.  No  Policy  of  Life  or  Endowment  Assurance  issued 
after  the  thirty-first  day  of  December,  in  the  year  eighteen  hun- 
dred and  eighty  by  a  domestic  company  shall  become  forfeited  or 
void  for  non-payment  of  premium  after  two  full  annual  pre- 
miums have  been  paid  thereon,  in  cash  or  note,  or  both  ;  but  up- 
on default  in  a  subsequent  premium  payment  such  policy  shall 
become  subject  to  the  conditions  expressed  in  the  four  following 
sections,  any  stipulation  or  condition  of  forfeiture  contained  in 
the  policy  or  elsewhere  to  the  contrary  notwithstanding ;  and  any 
waiver  by  the  assured  of  the  provisions  of  this  and  the  four  fol- 
lowing sections  shall  be  void  ;  but  the  provisions  of  this  section 
and  of  said  sections  shall  not  prevent  the  performance  of  any 


80  THE   THREE   SYSTEMS 

stipulation  or  condition  in  any  policy  issued  before  the  fifth  day 
of  March,  in  the  year  eighteen  hundred  and  eighty-one. 

Sect.  162.  In  case  of  default  in  the  payment  of  a  third  or  of 
any  subsequent  annual  premium  on  any  such  policy,  then,  with- 
out further  negotiation  or  stipulation,  such  policy  shall  be  bind- 
ing upon  the  company  for  an  amount  of  paid  up  insurance 
which  the  then  net  value  of  the  policy,  less  any  indebtedness  of 
the  assured  to  the  company  and  a  surrender  charge  as  provided 
in  the  following  section,  will  purchase  as  a  net  single  premium 
for  Life  or  Endowment  Assurance  maturing  or  terminating  at  the 
same  time  and  in  the  same  manner  as  provided  in  the  original 
policy  contract ;  that  is  to  say,  no  condition  of  the  policy  con- 
tract other  than  for  the  payment  of  premiums  shall  be  affected 
by  the  provisions  of  sections  one  hundred  and  sixty  one  to  one 
hundred  and  sixty-five  inclusive  ;  nor  shall  any  change  be  made 
in  the  terms  of  said  contract  on  account  of  default  in  premium 
payment,  after  two  full  annual  premiums  have  been  paid  as  pro- 
vided in  the  preceding  section,  except  as  herein  set  forth.  The 
net  value  of  the  policy,  including  all  dividend  additions  declared 
thereon  at  the  date  of  said  default,  shall  be  ascertained  according 
to  the  " combined  experience,"  or  " Actuaries'"  rate  of  Mor- 
tality, with  interest  at  four  per  cent,  per  annum  ;  and  from  such 
value  shall  be  deducted  any  indebtedness  of  the  insured  to  the 
company  or  notes  held  by  the  company  against  the  insured,  and 
a  surrender  charge  to  be  determined  as  provided  in  the  following 
section. 

Sect.  163.  Said  surrender  charge  shall  be  determined  as  fol- 
lows :  Assuming  the  rate  of  mortality  and  interest  mentioned  in 
the  preceding  section,  the  present  value  of  all  the  normal,  future, 
yearly  costs  of  insurance  which  by  its  terms  said  policy  is  ex- 
posed to  pay  in  case  of  its  continuance  shall  be  calculated,  and 
eight  per  cent,  of  this  sum  shall  be  the  legal  surrender  charge. 

Sect.  164.  When  after  the  payment  of  two  annual  premiums 
as  provided  in  section  one  hundred  and  sixty-one  the  insurable 
interest  in  the  life  of  the  insured  has  terminated,  the  net  value  of 
the  policy,  subject  to  the  conditions  named  in  section  one  hun- 
dred and  sixty  two,  shall  be  a  surrender  value  payable  in  cash  ; 
and  upon  the  termination  of  such  insurable  interest  the  holder  of 
a  policy  upon  which  by  its  terms  no  further  premiums  are  paya- 
ble may  upon  any  anniversary  thereof  claim  and  recover  in  cash 
from  the  company  a  surrender  value  computed  as  aforesaid  ;  but 
upon  policies  of  prudential  or  industrial  insurance,  on  which  the 
premiums  are  five  cents  per  week  and  upwards,  but  not  exceeding 
fifty  cents,  the  surrender  value  shall  in  all  cases  be  payable  in 
cash. 

Sect.  165.  The  insurable  interest  named  in  the  preceding  sec- 
tion shall  be  construed  to  have  terminated  when  the  insured  has 
no  minor  or  dependent  child  ;  and  his  wife,  if  he  has  one,  and 
any  living  beneficiary  or  beneficiaries  named  in  the  policy,  shall 
join  in  the  application  for  surrender  thereof. 

Sect.  166  The  provisions  of  the  seven  preceding  sections 
shall  not  apply  to  foreign  life  insurance  companies. 

As  there  have  been  many  contradictory  statements  made  with 
reference  to  a  policy-holder's  legal  claim,  under  this  law,  for  cash 
surrender  values,  a  communication  was  addressed  to  the  HON. 
ELIZUR  WRIGHT  with  reference  to  it.  The  communication  and 
his  answer  are  as  follows: 


OF  LIFE   INSURANCE.  81 

"CHICAGO,  111.,  Aug.  24,  1885. 
floN.  ELIZUR  WRIGHT, 

Boston,  Mass. 

Dear  Sir.- — Referring  to  the  Non-Forfeiture  Law  of  Massa- 
chusetts, 1880,  Public  Statutes,  Chap.  119  Sects.  161-166,  inclu- 
sive, of  which  you  are  the  recognized  author,  will  you  please  state 
under  what  form  of  policy,  if  any;  or,  under  what  conditions  a 
policy-holder  can  not  claim  the  cash  surrender  value  of  a  policy 
issued  under  this  law,  after  two  or  more  full  annual  premiums 
shall  have  been  paid,  in  cash,  and  no  conditions  of  non-forfeiture 
named  in  the  policy  having  been  violated 
Very  truly, 

MERVIN  TABOR, 

State  Actuary." 


"BOSTON,  Aug,  26,  1885. 
MERVIN  TABOR,  ESQ., 

Chicago,  111. 

Dear  Sir.--I  was  not  the  author  of  that  particular  feature  of 
the  Massachusetts  law  about  which  you  inquire.  Undoubtedly, 
whoever  was  the  author,  he  meant  to  prevent  tho  payment  of  any 
surrender  value,  in  cash,  whenever  "a  minor  or  dependent 
child"  existed  who  could  be  benefited  by  the  policy,  and  to  limit 
that  benefit  to  further  insurance.  As  it  the  adult  beneficiary,  if 
one  should  exist,  and  the  insured  father  himself,  were  not  better 
protectors  of  that  child  than  the  state  or  the  courts  could  pro- 
vide! That  feature,  in  my  judgment,  is  a  little  worse  than  worth- 
less, as  too  many  laws  are,  and  it  is  practically  inoperative,  be- 
cause it  can  apply  only  to  a  policy  whenever  the  holder  has  neg- 
lected to  have  the  cash  surrender  value  for  each  year  of  its  term, 
subsequent  to  the  second,  endorsed  upon  it.  This  endorsement  is 
always  made,  I  believe,  by  the  company  at  issue,  when  requested, 
and  I  don't  suppose  the  law  means  to  preclude  the  company  from 
performing  any  positive  promise  of  cash. 
Yours  truly, 

ELIZUR  WRIGHT." 

After  receiving  Mr.  Wright's  letter,  it  was  thought  advisable 
to  communicate  with  the  companies,  themse  ves,  and  accordingly 
the  following  communication  was  addressed  to  the  President  of 
each  of  the  Massachusetts  companies  under  date  of  Sept.  8th, 
1885: 

Dear  Sir. — Inquiries  are  being  made  at  this  office  with  refer- 
ence to  the  conditions  requisite  for  obtaining  the  cash  surrender 
value  of  a  policy  under  Chap.  119,  Sect's  161-166,  Public  Statutes 
of  Mass.  There  seems  to  exist  a  wide  difference  of  opinion. 
Some  claim  that  whenever  a  policy  holder  is  entitled  to  a  paid  up 
bv  operation  of  the  law,  he  is  also  entitled  to  the  cash  surrender 
value,  instead,  if  desi;ed;  while  others  assert  that  no  cash  sur- 
render values  can  be  paid  when  the  insured  has  a  minor  or  de- 
pendent child.  Earnestly  desiring  to  not  misrepresent  you,  and, 
after  consultation  with  the  Auditor  of  Pub.  Accounts,  who  is  Ex- 
Officio  Supt.  of  the  Insurance  Department  of  this  State,  it  has 
been  thought  best  to  address  this  communication  asking  your  in- 
terpretation of  the  law,  and  your  practice,  bearing  on  the  point 
under  discussion.  If  it  be  your  practice  to  extend  cash  surren- 


82  THE  THREE   SYSTEMS 

der  values  beyond  what,  in  your  opinion,  the  law  demands,  to 
certain  forms  of  policy  contract,  please  make  the  distinction  very 
plain  between  the  cash  surrender  values  secured  by  the  law,  and 
those  voluntarily  offered  by  the  company's  indorsement  of  the 
same.  Very  respectfully, 

MERVIN  TABOR, 

State  Actuary. 

In  reply,  the  following  communications  nave  been  received : 


Prom  the   New    England   Mutual   Life 
Insurance  Company. 

"  BOSTON,  Sept.  12,  1885. 
MERVIN  TABOR,  ESQ., 

185  Dearborn  St.,  Chicago,  111. 

Dear  Sir. — Your  favor  of  the  8th  inst.  is  received.  The  policy 
of  this  company  in  the  matter  of  the  payment  of  cash  surrender 
values  of  policies  under  the  n on  forfeiture  law  of  1880  is  fully 
shown  in  the  inclosed  circular.  Under  this  law,  after  two  full 
payments  of  premium  the  insured  is  entitled  to  paid-up  insu- 
rance without  further  negotiation  or  stipulation,  or  at  his  option 
may  in  all  cases  that  come  under  the  provisions  of  the  circular 
receive  the  cash  value  of  his  policy.  The  law  of  1880  is  subject 
to  interpretation  by  the  courts,  but  until  the  matter  has  been  ad- 
versely decided  upon,  we  shall  abide  by  and  pay  cash  values  as 
stated  in  the  circular.  Very  truly, 

(Signed)  BENJ.  F.  STEVENS, 

President. 


The  following  is  a  copy  of  the  circular  referred  to  by  President 
Stevens  : 

* '  The  attention  of  the  public  is  requested  to  the  two  distinc- 
tive features  of  the  Massachusetts  Non -Forfeiture  Law  pertaining 
to  Life  Insurance— by  which  a  cash  value  or  paid-up  insurance  is 
assured  to  each  Policy. 

FIRST.  Every  Policy,  upon  which  two  or  more  Annual  Pre- 
miums have  been  paid,  has  a  cash  value  payable  to  the  holder 
of  the  same,  when  application  is  made  therefor,  upon  the  anni- 
versary of  any  subsequent  Premiums,  provided  a  legal  discharge 
can  be  given  by  all  parties  interested.  A  policy  made  for  the 
benefit  of  the  insured  can  be  legally  surrendered  by  himself,  if 
living,  or,  by  his  administrator  or  executor,  in  case  of  his  death. 
A  Policy  made  for  the  benefit  of  a  married  woman  can  be  surren- 
dered upon  her  receipt  and  that  of  her  husband.  If  made  for  the 
benefit  of  children,  it  must  be  shown,  to  the  satisfaction  of  the 
company,  that  the  insured  has  no  minor  or  dependent  child. 

SECOND.  If  the  cash  surrender  value  of  a  Policy  is  not  ap- 
plied for,  upon  the  anniversary  of  the  payment  of  an  Annual 
Premium,  as  above  mentioned,  then  such  Policy,  by  lapse  of  pay- 
ment of  premiums,  shall  become,  in  the  words  of  the  law, 
"  without  further  negotiation  or  stipulation/'— binding  for  an 
amount  of  Paid  up  Insurance  which  is  determined  according  to 
the  provisions  of  the  law.  If  desired,  the  amounts  of  cash  sur- 
render values  and  Paid-up  Insurance  will  be  put  upon  the  Policy, 
and  their  payment  guaranteed  by  the  company.  It  is  believed 
that  this  law — which  applies  only  to  Massachusetts  companies, 


OF  LIFE  INSURANCE. 


83 


and  not  to  foreign  companies  represented  in  the  State— is  the 
nearest  approach  to  equity  yet  reached  by  State  legislation.  No 
other  State  has,  upon  its  Statute  Book,  a  law  compelling  com- 
panies to  give  to  the  insured  an  equivalent  for  the  amount  of 
premiums  they  have  paid. 

(Signed)  BENJ.  F.  STEVENS, 

President 

A  letter  received  from  Walter  C.  Wright,  Actuary  of  the  New 
England  Mutual  Life  Insurance  Company,  under  date  of  Sept.  10, 
1885,  written  during  the  absence  of  President  Stevens,  closed 
with  the  following  sentence: 

* '  We  endorse  values  on  all  policies,  and  we  are  well  satisfied 
with  the  working  of  the  law." 

From  the  State  Mutual  Life  Assurance  Co. 

"WORCESTER,  Mass.,  Sept.  22d,  1885. 
MERVIN  TABOR,  ESQ., 

Actuary  Insurance,  Dept.,  Illinois. 
185  Dearborn  St.,  Chicago,  111. 

Dear  Sir. — Our  interpretation  of  the  Non-Forfeiture  Law 
of  this  State  upon  the  points  which  you  inquire  about  is  this :  In 
most  cases  a  policy-holder  when  his  policies  lapse  has  the  option 
of  deciding  whether  he  will  take  the  cash  surrender  value  of  the 
same,  or  let  it  stand  for  a  paid  up  Insurance  value  as  determined 
by  the  law.  After  lapse,  if  there  be  minor  or  dependent  children, 
the  cash  surrender  value  cannot  be  paid  to  the  insured.  While 
the  Company  is  under  no  obligation  to  pay  cash  surrender  values 
except  at  the  anniversary  of  the  policy  after  the  second,  it  fre- 
quently does  pay  these  values  at  other  times  when  asked  to  do  so 
by  the  policy-holder.  As,  in  nine  cases  out  of  ten,  the  cash  sur- 
render value  is  requested  while  the  policy  is  still  in  force,  fre- 
quently, therefore,  the  existence  of  minor  or  dependent  children 
does  not  prevent  payment.  The  distinction* you  see  is  this:  The 
law  applies  only  to  lapsed  policies,  and  gives  the  minor  or  de- 
pendent children  a  vested  interest  in  the  cash  surrender  value  so 
that  it  cannot  be  paid  to  the  insured.  As  we  generally  deal  with 
policies  that  are  in  force  we  make  the  payment  of  the  cash  sur. 
render  value  to  the  insured  whether  there  are  minor  children  or 
not.  I  believe  this  covers  the  questions  you  ask. 

Yours  very  truly, 

(Signed)  A.  G.  BULLOCK, 

President." 

From    the    Massachusetts     Mutual    Life 
Insurance  Company. 

"SPRINGFIELD,  Mass.,  Sept.  llth,  1885. 
MERVIN  TABOR, 

Actuary, 

185  Dearborn  St.,  Chicago,  111. 

Dear  Sir.—  Your  favor  of  the  8th  came  duly  to  hand.  I 
have  asked  our  Secretary  and  Actuary  to  give  me  their  interpre- 
tations of  the  sections  of  Chap.  119,  of  Mass,  laws  referred  to  by 
you.  Their  replies  I  enclose  herewith,  and  I  trust  they  may  an- 
swer your  purpose.  These  opinions  were  written  independently; 


84  THE   THREE   SYSTEMS 

each  officer  being  ignorant  of  what  was  written  by  the  other,  and 
so  they  may  fairly  be  said  to  represent  the  company's  understand- 
ing of  the  law.  I  would  add  that  I  fully  concur  with  the  views 
expressed  in  these  letters 

Yours  truly, 

(Signed)  E.  W.  BOND, 

President" 

"  SPRINGFIELD,  Mass.,  Sept.  llth,  1885. 
E.  W.  BOND, 

President: 

Dear  Sir. — As  requested  by  you,  I  have  read  Mr.  Tabor's 
letter  of  the  8th  inst.,  and  to  the  questions  therein,  I  reply  as 
follows: 

"  Our  understanding  of  the  Massachusetts  Law  of  1880,  is  that 
at  any  of  the  times  when  a  cash  value  would  be  claimed,  as  a 
right,  by  an  insured  person  who  had  no  minor  or  dependent  child, 
the  same  cash  value  may  be  asked  as  a  favor  by  an  insured  person 
who  has  a  minor  or  dependent  child,  and  the  company  may  law- 
fully comply  with  this  request,  if  a  proper  surrender  can  lie  ob- 
tained from  the  insured  and  the  beneficiaries.  In  practice,  this 
company  is  in  the  habit  of  so  complying,  but  it  does  not  bind  it- 
self to  pay  cash  values  in  cases  where  the  same  are  not  required 
by  the  law,  except  that  it  agrees  to  pay  the  cash  values  on  fifteen 
and  twenty  payment  life  policies  (on  the  all  cash  plan)  after  they 
have  become  fully  paid-up,  on  full  surrender  of  each  such  policy 
on  the  anniversary  of  its  date. 

Very  truly, 

(Signed)  OSCAR  B.  IRELAND, 

Actuary." 


SPRINGFIELD,  MASS.,  Sept.  11,  1885. 
E.  W.  BOND,  ESQ., 
President: 

Dear  Sir.— In  response  to  your  request  that  I  give  you  my 
interpretation  of  the  so-called  Non-Forfeiture  Law  of  1880,  I 
would  say  that  according  to  my  understanding  of  sections  161  to 
166,  Chap.  119  of  our  Public  Statutes,  we  cannot  be  compelled  to 
pay  the  cash  value  fixed  therein  for  a  policy  issued  under  the  law, 
no  matter  whether  the  policy  be  written  for  the  benefit  of  one's 
estate  or  for  the  benefit  of  wife,  children  or  other  persons,  except 
when  the  insured  has  no  minor  or  dependent  children.  When 
the  insured  has  no  minor  or  dependent  children,  he  may  insist 
upon  such  cash  value,  provided  his  wife  or  any  other  beneficiary 
mentioned  in  the  policy,  joins  in  the  surrender  to  the  company; 
and  if  the  insured  be  in  a  condition  to  insist  upon  the  cash  value, 
he  can  only  claim  it  on  a  second  or  subsequent  anniversary  of  the 
policy.  The  law  places  no  obstacle  whatever  in  the  way  of  the 
company's  buying  its  policies  issued  under  it,  for  cash,  if  they 
choose  to  do  so,  even  when  the  insured  is  not  in  a  condition  to 
insist  upon  a  cash  value,  provided  the  insured  desires  cash,  and 
can  give  a  clear  and  valid  surrender  of  the  policy  by  himself  and 
all  beneficiaries  mentioned  therein. 

Our  practice  is  to  buy  Act  of  '80  policies,  paying  their  legal 
cash  value  after  two  years,  provided  we  can  get  a  valid  surrender 
by  the  insured  and  all  beneficiaries  mentioned  in  the  policy,  but 
we  at  all  times,  reserve  the  right  to  stand  upon  the  conditions  of 
the  law,  if  any  circumstance  should  seem  to  make  it  advisable  for 
the  company  to  do  so.  The  values  under  the  law  under  consider- 


OP  LIFE   INSURANCE.  85 

atlon,  both  In  cash  and  paid  up  insurance,  are  endorsed  on  the 
back  of  our  policy,  and  the  printed  matter  in  connection  with  the 
law  itself,  which  is  printed  on  the  policy,  plainly  shows  the  rights 
of  the  insured  and  the  rights  of  the  company. 

To  two  classes  of  policies  issued  by  us,  viz:  15  and  20  payment 
life  policies,  on  all  cash  plan,  we  attach  a  rider,  agreeing  to  pay 
the  legal  cash  value  at  the  end  of  15  or  20  years  from  the  date  of 
the  policy,  or  on  any  anniversary  thereafter;  provided  we  can  get 
a  valid  surrender  of  the  policy,  regardless  of  whether  the  insured 
has  minor  or  dependent  children  or  not.  You  of  course  know 
that  under  such  a  policy,  it  might  occur  that  the  insured  could 
demand  the  cash  value  of  his  policy  nt  any  time  within  the  15  or 
20  years;  so  that  our  voluntary  agreement  embodied  in  the  rider 
mentioned,  may  be  said  to  be  a  promise  addition  il  to  the  rights 
to  which  the  law  entitles  him;  and  a  waiver  of  a  right  which 
might  exist  at  the  end  of  these  terms  to  decline  to  pay  the  cash 
value. 

I  enclose  a  copy  of  the  rider  referred  to,  and  also  the  back  of 
our  policy  form;  these  show  just  how  this  matter  is  set  forth  to 
our  members. 

Very  respectfully  yours, 

(Signed)  JOHN  A.  HALL, 

Secretary." 

The  following  is  a  true  copy  of  the  "rider  "  referred  to  in  the 
letter  of  Secretary  Hall,  for  a  15-annual  payment  life  policy.  The 
rider  for  a  20-annual  payment  Life  policy  is  the  same,  except 
"  twenty  "  is  inserted  in  place  of  "  fifteen." 

"After  the  payment  of  fifteen  annual  premiums,  wholly  in 

cash,  on  this  Policy  No. ,  the  cash  surrender  value  of 

the  Policy,  (computed  according  to  the  method  described  in  sec- 
tions 162,  163  and  164  of  chapter  119,  of  the  Public  Statutes  of 
Massachusetts)  will  be  paid  on  the  fifteenth  or  any  succeeding 
anniversary  of  the  date  of  its  issue,  upon  full  surrender  of  the 
Policy  to  the  company  by  all  parties  in  interest." 

Printed  on  the  back  of  the  policy  to  which  this  ' '  rider "  is 
attached,  is  the  following: 

"  Cash  surrender  values  can  only  be  claimed  when  the 
insurable  interest  has  terminated;  see  sections  164  and  165  of  the 

law/' 


From  The  John  Hancock  Mutual  Life  Insurance 
Company. 


"BOSTON,  MASS.,  Sept.  14,  1885. 
MERVIN  TABOR,  ESQ., 

Chicago,  111. 

Dear  Sir. — Enclosed  please  find  form  of  our  policy  contract, 
from  which  you  will  please  observe  that  ''the  cash  surrender 


86  THE   THREE   SYSTEMS 

values  secured  by  law  and  those  voluntarily  offered  "by  the  com 
pany's  indorsement  of  the  same  "  are  identical. 

Very  truly, 

(Signed)  S.  H.  RHODES, 

PreM." 


On  the  back  of  the  policy  referred  to  is  a  table  of  cash,  and 
paid  up,  values,  over  which  is  printed  the  following: 

k- The  following  table  shows  the  amount  of  cash  that  can  be 
realized  on  this  policy  at  end  of  any  year,  provided  the  insurable 
interest  as  expressed  in  the  statute  (see  above)  has  ceased;  also, 
the  amount  of  paid  up  insurance  due  at  death  (or  if  an  endowment 
policy  at,  end  of  endowment  period)  in  case  of  non-payment  of 
any  premium." 


From  The  Berkshire  Life  Insurance  Company. 

PITTSFIELD,  MASS.,  Sept.  14,  1885. 

MR.  MERVIN  TABOR, 

State  Actuary,  &c., 
185  Dearborn  St.,  Chicago,  111. 

Dear  Sir. — In  answer  to  your  favor  I  would  say  that  this 
office  passes  upon  each  application  for  surrender  of  policies,  and 
determines  as  to  what  is  necessary  to  secure  for  the  company  a 
good  acquittance.  Our  counsel  does  not  construe  the  act  of  1880 
as  obliging  the  company  to  pay  a  cash  surrender  value  if  the  in- 
sured has  a  minor  or  dependent  child.  The  company  has  always 
endeavored  to  be  liberal,  in  the  construction  of  such  laws  as  affect 
the  interests  of  retiring  members,  but  until  the  Act  receives  judi- 
cial construction  by  courts  of  competent  jurisdiction,  no  claim  as 
to  its  practice  will  be  made  in  its  behalf. 

I  am  very  respectfully, 

(Signed)  JAMES  W.  HULL, 

Secretary. 

Thus  we  have,  in  the  foregoing  correspondence,  the  full  bene- 
fit of  the  construction  of  the  present  Non-forfeiture  law  of 
Massachusetts,  by  every  Life  Insurance  Company  affected  by  it. 
These  companies  have  also  given  u«,  in  an  open,  candid  and 
frank  manner,  their  practices  under  the  law.  They  have  not 
dodged  a  single  point  in  our  letter.  They  are  evidently  living 
up  to  not  only  the  letter,  but  also  the  spirit,  of  the  law ;  and, 
judging  from  this  correspondence,  we  conclude  that  whenever  a 
doubt  arises  as  to  the  real  meaning  of  the  law  they  give  their 
policy  holders  the  benefit  of  such  doubt,  if  they  can  do  so  with- 
out involving  themselves  and  consequently  their  membership 
— for  they  are  all  Mutual  Companies—  in  legal  complications  that 
might  possibly  arise  through  the  instrumentality  of  designing 
and  unscrupulous  parties. 


OF    LIFE    INSURANCE.  8? 

The  only  difference  in  effect,  concerning  cash  surrender 
values  of  policies  issued  by  Massachusetts  Companies,  be- 
tween the  Massachusetts  Insurance  law  of  1880  and  the  law 
of  1887  hereunto  appended,  is,  that  under  the  former  law 
there  was  a  difference  of  opinion  as  to  whether  the  holder 
of  a  policy — except  industrial  policies — could  demand  the 
cash  surrender  value  of  the  same  when  there  were  minor  or 
dependent  children;  the  latter  law  gives  the  holder  of  any 
and  all  forms  of  policies  the  right  to  demand  cash  surrender 
values  on  any  anniversary  after  two  full  annual  premiums 
shall  have  been  paid  thereon.  The  law  of  1887  also  gives  the 
Massachusetts  companies  the  right  to  deduct  five  per  cent, 
from  the  surrender  value  of  all  endowment  policies;  this  right, 
however,  has  been  and  is  being  waived,  wholly  or  in  part,  by 
most  of  the  companies  of  that  State. 

EXTRACT   FROM   THE   MASSACHUSETTS   INSURANCE   ACT   OF    1887. 

SEC.  76.  All  policies  hitherto  issued  by  any  domestic  life 
insurance  company*  shall  be  subject  to  the  provisions  of  law 
applicable  and  in  force  at  the  date  of  such  issue.  No  policy 
of  life  or  endowment  assurance  hereafter  issued  by  any  such 
company  shall  become  forfeit  or  void  for  non-payment  of  pre- 
mium after  two  full  annual  premiums,  in  cash  or  note,  or  both, 
have  been  paid  thereon;  but  in  case  of  default  in  the  pay- 
ment of  any  subsequent  premium,  then,  without  any  further 
stipulation  or  act,  such  policy  shall  be  binding  upon  the  com- 
pany for  the  amount  of  paid-up  insurance  which  the  then  net 
value  of  the  policy  and  all  dividend  additions  thereon,  com- 
puted by  the  rule  of  section  eleven,  less  any  indebtedness  to 
the  company  on  account  of  said  policy,  and  less  the  surrender 
charge  provided  herein,  will  purchase  as  a  net  single  premium 
for  life  or  endowment  insurance  maturing  or  terminating  at 
the  time  and  in  the  manner  provided  in  the  original  policy 
contract;  and  such  default  shall  not  change  or  effect  the  con- 
ditions or  terms  of  the  policy,  except  as  regards  the  payment 
of  premiums  and  the  amount  payable  thereon.  Said  sur- 
render charge  shall  be  eight  per  cent,  of  the  insurance  value  of 
the  policy  at  the  date  of  default,  which  insurance  value  io  the 
present  value  of  all  the  normal  future  yearly  costs  of  insurance 
which  by  its  terms  said  policy  is  exposed  to  pay  in  case  of  its 
continuance,  computed  upon  the  rate  of  mortality  and  interest 
assumed  in  section  eleven  ("Combined  Experience"  or  "Actu- 
aries' Table"  rate  of  mortality  with  interest  at  the  rate  of  four 
per  cent,  per  annum).  Every  such  policy,  after  the  payment 


* — Section  1  of  this  law  says  "  the  woid  *  domestic  '  designates  those  companies 
ncorporated  or  formed  in  this  Commonwealth." 


88  THE    THREE    SYSTEMS 

of  two  full  annual  premiums  thereon,  shall  have  a  surrender 
value  which  shall  be  its  net  value,  less  the  surrender  charge, 
and  less  any  indebtedness  to  the  company  on  account  of  the 
said  policy,  and  its  holder  may,  upon  any  subsequent  anni- 
versay  of  its  issue,  surrender  the  same  and  claim  and  recover 
from  the  company  such  surrender  value  in  cash:  Provided, 
that  from  the  surrender  value  of  all  endowment  policies  the 
company  may  deduct  five  per  cent.  ******  Upon 
surrender,  on  any  anniversary  of  its  issue,  of  a  policy  which 
has  become  paid  up  after  the  payment  of  two  full  annual  pre- 
miums,  by  force  of  the  statute  upon  default  in  payment  of 
premium,  the  holder  shall  be  entitled  to  its  net  value,  pay- 
able in  cash:  Provided,  that  from  such  net  value  of  all  en- 
dowment policies  the  company  may  deduct  five  per  cent. 
But  no  surrender  of  a  policy  shall  be  made  without  the  writ- 
ten assent  of  the  person  to  whom  the  policy  is  made  payable. 
Any  condition  or  stipulation  in  the  policy  or  elsewhere,  con- 
trary to  the  provisions  of  this  section  and  any  waiver  of  such 
provisions  by  the  assured,  shall  be  void. 

In  1896  the  law  was  again  amended  so  as  to  provide  that 
the  surrender  charge  on  all  policies,  both  life  and  endow- 
ment, should  be  eight  per  cent,  of  the  insurance  value,  the 
amendment  of  1887  allowing  a  five  per  cent,  surrender  charge 
on  endowments.  It  was  also  provided  that  the  surrender 
values  of  prudential  or  industrial  policies,  with  weekly  pre- 
miums of  not  more  than  fifty  cents  each,  should  be  payable 
in  cash.  The  amended  law  is  as  follows: 

All  policies  hitherto  issued  by  any  domestic  life  insurance 
company  shall  be  subject  to  the  provisions  of  law  applicable 
and  in  force  at  the  date  of  such  issue.  No  policy  of  life  or 
endowment  insurance  hereinafter  issued  by  any  such  com- 
pany shall  become  forfeit  or  void  for  non-payment  of  pre- 
mium after  two  full  annual  premiums,  in  cash  or  note,  or 
both,  have  been  paid  thereon;  but  in  case  of  default  in  the 
payment  of  any  subsequent  premium,  then,  without  any 
further  stipulation  or  act,  such  policy  shall  be  binding  upon 
the  company  for  the  amount  of  paid-up  insurance  which  the 
then  net  value  of  the  policy  and  all  dividend  additions  there- 
on, computed  by  the  rule  of  section  eleven,  less  any  indebted- 
ness to  the  company  on  account  of  said  policy,  and  less  the 
surrender  charge  provied  herein,  will  purchase  as  a  net  single 
premium  for  life  or  endowment  insurance  maturing  or  termi- 
nating at  the  time  and  in  the  manner  provided  in  the  original 
policy  contract;  and  such  default  shall  not  change  or  affect 
the  conditions  or  terms  of  the  policy,  except  as  regards  the 
payment  of  premiums  and  the  amount  payable  thereon.  Said 
surrender  charge  shall  be  eight  per  cent,  of  the  insurance 
value  of  the  policy  at  the  date  of  default,  which  insurance 
value  is  the  present  value  of  all  normal  future  yearly  costs  of 


OF    LIFE    INSURANCE. 


89 


insurance,  which  by  its  terms  said  policy  is  exposed  to  pay  in 
case  of  its  continuance,  computed  upon  the  rate  of  mortality 
and  interest  assumed  in  section  eleven.  Every  such  policy, 
after  the  payment  of  two  annual  premiums  thereon,  or  when 
by  its  terms  it  has  become  paid-up,  shall  have  a  surrender 
value,  which  shall  be  its  net  value,  less  the  surrender  charge, 
and  less  any  indebtedness  to  the  company  on  account  of  the 
said  policy,  and  its  holder  may,  upon  any  subsequent  anni- 
versary of  its  issue,  surrender  the  same  and  claim  and  recover 
from  the  company  such  surrender  value  in  cash.  On  policies 
of  prudential  or  industrial  insurance  on  which  the  weekly 
premiums  are  not  more  than  fifty  cents  each,  the  surrender 
value  in  all  cases  shall  be  payable  in  cash.  Upon  surrender, 
on  any  anniversary  of  its  issue  of  a  policy  which  has  become 
paid  up  after  the  payment  of  two  full  annual  premiums,  by 
force  of  the  statute  upon  default  in  payment  of  premium,  the 
holder  shall  be  entitled  to  its  net  value,  payable  in  cash.  But 
no  surrender  of  a  policy  shall  be  made  without  the  written 
assent  of  the  person  to  whom  the  policy  is  made  payable. 
Any  condition  or  stipulation  in  the  policy  or  elsewhere,  con- 
trary to  the  provisions  of  this  section  and  any  waiver  of  such 
provisions  by  the  insured,  shall  be  void. — Sec.  76,  chap.  470, 
laws  of  1896. 

The  following  examples  illustrate  the  benefits  of  the  law, 
and  are  based  on  the  amendment  of  1896: 

Example  I.     Ordinary  Life  Policy. — Age  of  insured,  35; 
amount,  $10,000;  annual  premium,  $273,  payable  for  life. 


End  of  Yr. 

Cash. 

2 

$59 

3 

180 

4 

306 

5 

435 

6 

569 

7 

707 

8 

851 

9 

998 

10 

1,149 

11 

1,304 

12 

1,461 

13 

1,622 

14 

1,785 

15 

1,952 

16 

2,121 

17 

2,292 

Paid-up. 

$165 
495 
821 
1,142 
1,459 
1,772 
2,081 
2,384 
2,681 
2,971 
3.252 
3,526 
3,792 
4,050 
4,301 
4,544 


End  of  Yr. 

Cash. 

Paid-up. 

18 

$2,466 

$4,779 

19 

2,641 

5,007 

20 

2,819 

5,227 

21 

2,999 

5,441 

22 

3,180 

5,647 

23 

3,362 

5,846 

24 

3,547 

6,039 

25 

3,732 

6,225 

30 

4,658 

7,056 

35 

5,556 

7,731 

40 

6,391 

8,273 

45 

7,144 

8,704 

50 

7,821 

9,055 

55 

8,465 

9,360 

60 

9,015 

9,600 

65 

10,000 

90  THE    THREE    SYSTEMS 

Example  II.  Twenty-Payment  Life  Policy. — Age  of  in- 
sured, 35;  amount,  $10,000;  annual  premium,  $354,  payable 
for  twenty  years. 

EndofYr.        Cash.  Paid-up.  End  of  Yr.        Cash.  Paid-up. 

2  $236  $663  18          $4,520          $8,761 

3  434  1,192  19  4,885  9,259 

4  640  1,717  20  5,265          10,000 

5  854  2,240  21  5,383 

6  1,076  2,760  22  5,503 

7  1,308  3,277  23  5,623 

8  1,549  3,790  24  5,745 

9  1,800  4,301  25  5,867 

10  2,060  4,807  30  6,478 

11  2,330  5,309  35  7,069 

12  2,609  5,807  40  7,620 

13  2,899  6,301  45  8,116 

14  3,199  6,794  50  8,563 

15  3,511  7,285  55  8,988 

16  3,834  7,776  60  9,351 

17  4,170  8,267  65  10,000 

Example  III.  Twenty- Year  Endowment  Policy. — Age  of 
insured,  35;  amount,  $10,000;  annual  premium,  $510,  payable 
for  twenty  years. 

EndofYr.        Cash.  Paid-up.  EndofYr.        Cash.  Paid-up. 

2  $580          $1,086  12          $4,831          $6,496 

3  925  1,679  13  5,370  6,971 

4  1,287  2,262  14  5,935  7,435 

5  1,664  2,832  15  6,528  7,888 

6  2,058  3,391  16  7,151  8,330 

7  2,470  3,939  17  7,806  8,762 

8  2,902  4,475  18  8,497  9,184 

9  3,352  4,998  19  9,227  9,596 

10  3,823  5,510  20          10,000 

11  4,316  6,009 

In  the  year  1900  a  bill  was  introduced  and  passed  by  the 
Massachusetts  legislature  providing  for  a  change  in  the  re- 
serve standard  on  all  new  policies  issued  on  and  after  Jan- 
uary i,  1901,  from  the  Actuaries'  table,  with  four  per  cent 
interest,  to  the  American  table,  with  three  and  one-half  per 
cent  interest.  A  proviso  was  further  made  that  the  com- 
panies might,  if  they  choose,  value  such  new  policies  by  the 
American  table,  with  three  per  cent  interest.  The  same  law 
provided  for  a  change  in  the  surrender  charge  on  the  new 
contracts,  making  it  five  per  cent  of  the  present  value  of  the 
future  net  premiums  at  the  date  of  default  instead  of  eight 
per  cent  of  the  insurance  value  of  the  policy,  and  also  making 
the  contracts  non-forfeitable  at  the  end  of  three  years  instead 
of  two,  as  provided  by  the  old  law.  Following  is  the  amended 

law  so  far  avS  it  relates  to  non-forfeiture; 


OF    LIFE    INSURANCE.  91 

SEC.  76.  All  policies  issued  prior  to  Jan.  I,  1901,  by  any 
domestic  life  insurance  company  shall  be  subject  to  the  pro- 
visions of  law  limiting  forfeiture  applicable  and  in  force  at  the 
date  of  their  issue.  No  policy  of  life  or  endowment  insurance 
issued  after  Dec.  31,  1900,  by  any  such  company,  shall  become 
forfeit  or  void  for  non-payment  of  premium  after  three  full 
annual  premiums  have  been  paid  thereon;  but  in  case  of  de- 
fault in  the  payment  of  any  subsequent  premium,  then,  with- 
out any  further  stipulation  or  act,  such  policy  shall  be  binding 
upon  the  company  for  the  amount  of  paid-up  insurance  which 
the  then  net  value  of  the  policy  and  all  dividend  additions 
thereon,  computed  by  the  rule  of  section  eleven,  less  any  in- 
debtedness to  the  company  on  account  of  said  policy,  and  less 
the  surrender  charge  provided  herein,  will  purchase  as  a 
single  net  premium  for  life  or  endowment  insurance  maturing 
or  terminating  at  the  time  and  in  the  manner  provided  in  the 
original  contract;  and  such  default  shall  not  change  or  affect 
the  conditions  or  terms  of  the  policy,  except  as  regards  the 
payment  of  premiums  and  the  amount  payable  thereon.  Said 
surrender  charge  shall  be  (unless  fixed  at  a  smaller  rate  by  the 
policy)  five  per  centum  of  the  present  value  of  the  future  net 
premiums  at  the  date  of  default,  which  by  its  terms  said 
policy  is  exposed  to  pay  in  case  of  its  continuance,  computed 
upon  the  rate  of  mortality  and  interest  assumed  in  section 
eleven.  But  any  company  may  contract  with  its  policy-hold- 
ers to  furnish,  in  lieu  of  the  paid-up  insurance  provided  for 
in  this  section  any  other  form  of  life  insurance  lawful  in  this 
commonwealth  of  not  less  value.  Every  such  paid-up  policy 
shall  have  a  cash  surrender  value  which  shall  be  its  net  value, 
less  any  indebtedness  to  the  company  on  account  of  said 
policy,  and  every  policy  which  by  its  terms  has  become  paid 
up  shall  have  a  cash  surrender  value,  which  shall  be  its  net 
value  less  five  per  cent,  of  one  net  premium,  and  the  holder  of 
any  paid-up  policy  may,  upon  any  anniversary  of  its  issue, 
surrender  the  same  and  claim  and  recover  from  the  company 
such  surrender  value  in  cash.  But  no  surrender  of  a  policy 
shall  be  made  without  the  written  assent  of  the  person  to 
whom  the  policy  is  made  payable.  On  policies  of  prudential 
or  industrial  insurance  on  which  the  weekly  premiums  are  not 
more  than  fifty  cents  each  the  surrender  value  shall  in  all 
cases  be  payable  in  cash,  which  shall  be  a  legal  claim  for  not 
more  than  two  years  from  the  date  of  lapse.  Any  condition 
or  stipulation  in  the  policy  or  elsewhere  contrary  to  the  pro- 
visions of  this  section  and  any  waiver  of  such  provisions  by 
the  insu  d  shall  be  void. 


92  THE  THREE  SYSTEMS 


CHAPTER   X. 


CLASS   B. — NON-FORFEITURE   LAWS  OF   MAINE,    MICHIGAN, 
KENTUCKY  AND  MISSOURI. 


B.  CLASS. 

Into  this  class  are  grouped  all  Life  Insurance  Companies  doing 
business  on  the  Level  Premium  plan,  that  are  operating  under  the 
Non-forfeiture  laws  of  their  respective  States— except  Massachu- 
setts—and also  those  companies,  their  States  having  no  Non- 
forfeiture laws,  that  have  adopted,  voluntarily,  Non  forfeiting 
forms  of  policies  by  which  the  reserves  of  their  policy-holders 
are  either  partially  or  wholly  protected  after  two  or  three  annual 
premiums  have  been  paid. 

The  Non-forfeiture  Law  of  Maine.— Only  one  company 
is  doing  business  under  this  law,  and,  in  several  respects,  the 
company  is  issuing  more  liberal  forms  of  policies  than  the  law 
requires.  The  law  which  was  passed  in  1877  reads  as  follows: 

"  SECTION  I. — Every  policy  of  life  Insurance  issued  on  and 
after  the  first  day  of  April,  in  the  year  of  our  Lord  one  thousand 
eight  hundred  and  seventy-seven,  by  any  company  chartered  by 
the  authority  of  this  State,  which  may  be  forfeited  for  non-pay- 
ment of  premiums,  including  all  notes  given  for  premiums  or  in- 
terest thereon  after  it  shall  have  been  in  force  three  full  years, 
and  which  shall  not  contain  provision  for  a  surrender  value  at 
least  equivalent  to  the  value  arising  under  the  terms  of  this  Act, 
shall,  nevertheless,  be  continued  in  force  to  an  extent  and  for  a 
period  of  time  to  be  determined  as  follows,  to  wit:  The  net  value 
of  the  policy,  when  the  premium  becomes  due  and  is  not  paid, 
shall  be  ascertained  according  to  the  combined  experience  or 
actuaries'  rate  of  mortality,  with  interest  at  four  per  centum  per 
annum.  After  deducting  from  three-fourths  of  such  net  value 
any  indebtedness  to  the  Company,  or  notes  held  by  the  Company 
against  the  insured  (which  notes,  if  given  for  premium,  shall 
then  be  cancelled),  what  remains  shall  be  considered  as  a  net 
single  premium  of  temporary  insurance  ;  and  the  term  for  which 
it  will  insure  shall  be  determined  according  to  the  age  of  the 
party  at  the  time  of  the  lapse  of  the  policy,  and  the  assumptions 
of  mortality  and  interest  aforesaid;  but  if  the  policy  shall  be  an 
endowment  payable  at  a  certain  time,  or  at  death  if  it  shall  pre- 
viously occur,  then,  if  what  remains  as  aforesaid  shall  exceed  the 
net  single  premium  of  temporary  insurance  for  the  balance  of  the 
endowment  term  for  the  full  amount  of  the  policy,  such  excess 


OF  LIFE   INSUKANCE.  93 

shall  be  considered  as  a  net  single  premium  or  simple  endowment, 
payable  only  at  the  same  time  as  the  original  endowment,  and  in 
case  the  life  insured  survives  to  such  time;  and  the  amount  thus 
payable  by  the  Company  shall  be  determined  according  to  the 
age  of  the  party  at  the  time  of  the  lapse  of  the  policy,  and  the 
assumptions  of  morality  and  interest  aforesaid." 

"  SECT.  2, — If  the  death  of  the  life  insured  occur  within  the 
term  of  temporary  insurance  covered  by  the  value  of  the  policy 
as  determined  in  the  previous  section,  and  if  no  condition  of  the 
insurance  other  than  the  payment  of  premium  has  been  violated 
by  the  insured,  the  Company  shall  be  bound  to  pay  the  amount 
of  the  policy  the  same  as  if  there  had  been  no  lapse  of  premium, 
anything  in  the  policy  to  the  contrary  notwithstanding;  provided, 
however,  that  notice  of  the  claim,  and  proof  of  the  death,  shall 
be  submitted  to  the  Company,  in  the  same  manner  as  provided  by 
the  terms  of  the  policy,  within  ninety  dnys  after  the  decease; 
and,  provided,  that  the  Company  shall  have  the  right  to  deduct 
from  the  amount  insured  in  the  policy  the  amount,  compounded 
at  seven  per  centum  per  annum,  of  all  the  premiums  that  had 
been  forborne  at  the  time  of  the  death,  including  the  whole  of  the 
year's  premium  in  which  the  death  occurs." 

The  law  was  amended  in  1887,  and  now  reads: 
Every  life  insurance  policy  issued  after  March  31,  1877,  by 
any  company  chartered  by  this  State,  which  may  be  forfeited 
for  non-payment  of  premiums,  including  all  notes  given  for 
premiums  or  loans,  or  interest  thereon,  after  it  has  been  in 
force  three  full  years,  and  -which  does  not  provide  for  a  sur- 
render value,  at  least  equivalent  to  the  value  arising  under  the 
terms  of  this  and  the  following  section,  is  nevertheless  con- 
tinued in  force  to  an  extent,  and  for  a  period  to  be  determined 
as  follows,  to  wit:  the  net  value  of  the  policy,  when  the  pre- 
mium becomes  due  if  not  paid,  shall  be  ascertained  according 
to  the  Combined  Experience  or  Actuaries'  rate  of  mortality, 
with  interest  at  the  rate  of  four  per  cent,  a  year:  from  such 
net  value  there  shall  be  deducted  the  present  value  of  the 
difference  between  the  future  premiums  named  in  the  policy, 
and  the  future  net  premiums  on  said  policy,  ascertained  ac- 
cording to  the  rates  of  mortality  and  interest  aforesaid,  in  no 
event,  however,  to  exceed  one-fourth  of  said  net  value,  and  in 
ascertaining  said  net  value,  when  the  premium  is  payable 
semi-annually  or  quarterly,  there  shall  be  deducted  from  the 
net  value  of  the  policy,  assuming  net  annual  premiums,  the 
net  premiums  for  the  unpaid  semi-annual  or  quarterly  instal- 
ments for  that  year  which  shall  not  be  considered  an  indebt- 
edness, but  as  forborne  premiums;  what  remains,  after  de- 
ducting any  indebtedness  to  the  company  on  account  of  the 
policy,  or  notes  held  by  the  company  against  the  insured, 
which  notes  shall  be  canceled,  shall  be  considered  as  a  net 
single  premium  of  temporary  insurance,  and  the  term  for 
which  it  will  insure  shall  be  determined  according  to  the  age 
of  the  party  at  the  time  of  the  lapse  of  the  policy,  and  the 
assumptions  of  mortality  and  interest  aforesaid;  but  if  the 
policy  is  an  endowment,  payable  at  a  time  certain,  or  at  death 
if  it  should  previously  occur,  then,  if  what  remains  as  afore- 
said exceeds  the  single  net  premium,  of  temporary  insurance 
for  the  balance  of  the  endowment  term  for  the  full  amount  of 
the  policy,  such  excess  shall  be  considered  a  net  single  pre- 


94  ,  THE   THREE   SYSTEMS 

mium  for  simple  endowment,  payable  only  at  the  same  time  as 
the  original  endowment,  and  in  case  the  insured  survives  to 
that  time;  and  the  amount  thus  payable  by  the  company  shall 
be  determined  according  to  the  age  of  the  party  at  the  time  ot 
the  lanse  of  the  policy,  and  the  assumptions  of  mortality  and 
interest  aforesaid. 

If  the  ceath  of  the  insured  occurs  within  the  term  of  tem- 
porary insurance  covered  by  the  value  of  the  policy  as  de- 
termined in  the  preceding  section,  and  if  no  condition  of  the 
insurance  other  than  the  payment  of  premiums  has  been  vio- 
lated by  the  insured,  the  company  shall  pay  the  amount  of  the 
policy,  as  if  there  had  been  no  lapse  of  the  premium,  anything 
in  the  policy  to  the  contrary  notwithstanding;  provided,  how- 
ever, that  notice  of  the  claim  and  proof  of  the  death  shall  be 
submitted  to  the  company  in  the  manner  provided  by  the 
terms  of  the  policy  within  one  year  after  the  death,  and  pro- 
vided, also,  that  the  company  may  deduct  from  the  amount 
insured  in  the  policy  the  amount  compounded  at  seven  per 
cent,  a  year  of  the  ordinary  life  premiums  at  age  of  issue,  that 
had  been  forborne  at  the  time  of  the  death,  including  the 
whole  year's  premium  in  which  the  death  occurs,  not  exceed- 
ing five  in  number.  But  any  such  company  may  issue  to  a 
resident  of  any  other  State  or  country,  a  policy  conforming 
to  the  laws  of  such  State  or  country,  and  not  subject  to  this 
and  the  preceding  section. — Sees.  91,  92,  chap.  49,  laws  of 
1887. 

The  Non-Forfeiture  Law  of  Michigan,  as  amended,  in 
1881: 

SEC.  17.  No  policy  of  insurance  on  life,  issued  after  this  act 
shall  take  effect,  by  any  company  organized  under  the  laws  of 
this  State,  shall  be  forfeited  or  become  void  by  the  non-payment 
of  any  premium  thereon,  after  the  third,  any  further  than  as  fol- 
lows: The  net  value  of  the  policy  when  the  premium  becomes 
due  and  is  not  paid,  shall  be  ascertained  according  to  the 
"  American  experience  Table  "  rate  of  mortality  with  interest  at 
four  per  centum  per  annum. 

A  surrender  charge  shall  be  first  deducted  from  such  net  value 
on  the  following  basis,  to  wit:  From  policies  that  have  paid 
three  full  years'  premiums,  forty  (40)  per  cent.;  from  policies 
that  have  paid  four  full  years'  premiums,  thirty  six  (36)  per  cent. ; 
from  policies  that  have  paid  five  full  years'  premiums,  thirty  two 
(32)  per  cent.,  and  so  on  in  like  manner,  decreasing  the  discount 
four  (4)  per  centum  for  each  full  years'  premium  paid,  until  the 
discount  is  exhausted,  when  no  surrender  charge  shall  be  mi.de. 

After  deducting  the  surrender  charge  from  the  n'  t  value,  the 
remainder  shall  be  considered  a  net  single  premium  of  whole  life 
non-participating  insurance  and  the  amount  it  will  insure  shall 
be  determined  according  to  the  age  of  the  party  at  the  time  when 
the  unpaid  premium  became  due  and  the  assumptions  aforesaid 
in  regard  to  rate  of  interest  and  table  of  mortality. 

In  case  of  any  indebtedness  on  any  policy,  such  indebtedness 
shall  be  first  deducted  from  the  net  value  remaining,  after  deduct- 
ing the  discount,  and  the  remainder,  if  any,  shall  be  used  as  the 
net  single  premium  as  aforesaid. 


OF    LIFE    INSURANCE.  95 

Two  other  States,  in  addition  to  those  heretofore  named, 
provide  for  absolute  non-forfeiture  of  a  policy  after  a  certain 
period  without  action  on  the  part  of  the  insured.  They  are 
Kentucky  and  Missouri,  and  the  laws  are  as  follows: 

KENTUCKY. 

SEC.  122. — All  policies  hitherto  issued  by  any  domestic 
life  insurance  company  shall  be  subject  to  the  provisions  of 
law  applicable  and  in  force  at  the  date  of  such  issue.  No 
policy  of  life  or  endowment  insurance  hereafter  issued  by  any 
such  company,  shall  become  forfeit  or  void  for  non-payment 
of  premium  after,  in  ordinary  insurance  two,  and  in  industrial 
insurance  five  full  annual  premiums  in  cash  have  been  paid 
thereon;  but  in  case  of  default  in  the  payment  of  any  subse- 
quent premium,  then,  without  any  further  stipulation  or  act 
except  as  herein  provided,  such  policy  shall  be  binding  upon 
the  company  for  the  amount  of  paid-up  insurance  which  the 
then  net  value  of  the  policy  and  all  dividend  additions  thereon 
computed  by  the  rule  of  section  116,  less  any  indebtedness  to 
the  company  on  account  of  said  policy,  and  less  the  surrender 
charge  as  provided  herein,  will  purchase  as  a  net  single  pre- 
mium for  life  endowment  insurance  maturing  or  terminating 
at  the  time  and  in  the  manner  provided  in  the  original  policy 
contract;  and  such  default  shall  not  change  or  effect  the  con- 
ditions or  terms  of  the  policy,  except  as  regards  the  payment 
of  premiums  and  the  amount  payable  thereon:  Provided,  that 
policies  of  industrial  life  companies  shall  be  surrendered  to 
the  company,  and  application  for  said  paid-up  policy  be  made 
in  writing  within  eight  weeks  after  said  default,  on  blanks 
obtainable  from  the  company  for  that  purpose.  Said  sur- 
render charge  shall  be  eight  per  cent,  of  the  insurance  value 
of  the  policy  at  the  date  of  default,  which  insurance  value  is 
the  present  value  of  all  the  normal  future  yearly  costs  of  in- 
surance which  by  its  terms  said  policy  is  exposed  to  pay  in 
case  of  its  continuance,  computed  upon  the  rate  of  mortality 
and  interest  assumed  in  section  116.  Every  such  policy  sub- 
ject to  the  conditions  as  to  policies  of  industrial  life  com- 
panies as  hereinbefore  prescribed,  after  the  payment  of,  in 
ordinary  insurance  two,  and  industrial  insurance  five  full 
annual  premiums  thereon,  in  cash,  shall  have  a  surrender 
value,  which  shall  not  be  less  than  two-thirds  of  its  net  value, 
computed  bv  the  rule  of  section  116,  less  any  indebtedness  to 
the  company  on  account  of  said  policy;  and  its  holder  may, 
upon  any  subsequent  anniversary  of  its  issue,  surrender  the 
same  and  claim  and  recover  from  the  company  such  surrender 
value  in  cash.  Upon  the  surrender,  on  any  anniversary  of  its 
issue,  of  a  policy  which  has  become  paid-up,  by  force  of  the 
statute  upon  default  in  payment  of  premiums,  after  two  full 
annual  ^remiums  have  been  paid,  the  holder  shall  be  entitled 
to  not  less  than  two-thirds  of  its  then  net  value,  computed  by 
the  rule  of  section  116.  On  policies  of  industrial  insurance  on 
which  the  weekly  premiums  are  not  more  than  fifty  cents 
each,  the  surrender  value  in  all  cases  shall  be  payable  in  cash. 
Upon  the  surrender,  on  any  anniversary  of  its  issue,  of  a 
policy  which  has  become  paid-up,  after  the  payment  of  five 
full  annual  premiums,  by  force  of  the  statute  upon  default  in 
payment  of  premium,  the  holder  shall  be  entitled  to  not  less 


•)6  THE    THREE    SYSTEMS 

than  two-thirds  of  its  net  value,  payable  in  cash.  Any  condi- 
tion or  stipulation  in  the  policy,  or  elsewhere,  contrary  to  the 
provisions  of  this  section,  and  any  waiver  of  such  provisions 
of  tnis  section,  and  any  waiver  of  such  provisions  by  the 
assured,  shall  be  void. 

Approved  July  I,  1893. 

SEC.  116. — When  the  actual  funds  of  any  life  insurance 
company  doing  business  in  this  commonwealth  are  not  of  a 
net  cash  value  equal  to  its  liabilities,  counting  as  such  the  net 
value  of  its  policies,  which  shall  be,  until  the  3ist  day  of  De- 
cember, 1895,  valued  according  to  the  "American  Experience" 
Table  of  Mortality,  with  interest  at  four  and  one-half  per 
centum  per  annum,  and  on  and  after  that  day  shall  be  valued 
according  to  the  "Combined  Experience"  or  "Actuaries"  Table 
Rate  of  Mortality,  with  interest  at  four  per  centum  per  annum, 
it  shall  be  the  duty  of  the  Insurance  Commissioner  to  give 
notice  to  such  company  and  its  agents  to  discontinue  issuing 
new  policies  within  tms  commonwealth  until  such  time  as  its 
funds  have  become  equal  to  its  liabilities,  valuing  its  policies 
as  aforesaid.  Any  officer  or  agent  who,  after  such  notice  has 
been  given,  issues  a  new  policy  from  and  on  behalf  of  such 
company,  before  its  funds  have  become  equal  to  its  liabilities 
as  aforesaid,  shall  forfeit  for  each  offense  not  exceeding  one 
thousand  dollars. 

MISSOURI. 

No  policies  of  insurance  on  life  hereafter  issued  by  any 
life  insurance  company  authorized  to  do  business  in  this 
State,  on  and  after  the  first  day  of  August,  A.  D.,  1879,  shall, 
after  payment  upon  it  of  two  full  annual  premiums,  be  for- 
feited or  become  void  by  reason  of  the  non-payment  of  pre- 
mium thereon,  but  it  shall  be  subject  to  the  following  rules 
of  commutation,  to  wit:  The  net  value  of  the  policy,  when  the 
premium  becomes  due  and  is  not  paid,  shall  be  computed 
upon  the  American  Experience  Table  of  Mortality,  with  four 
and  one-half  per  cent,  interest  per  annum,  and  after  deducting 
from  three-fourths  of  such  net  value  any  notes  or  other  in- 
debtedness to  the  company,  given  on  account  of  past  pre- 
mium payments  on  said  policy  issued  to  the  insured,  which 
indebtedness  shall  then  be  canceled,  the  balance  shall  be  taken 
as  a  net  single  premium  for  temporary  insurance  for  the  full 
amount  written  in  the  policy,  and  the  term  for  which  such 
temporary  insurance  shall  be  in  force  shall  be  determined  by 
the  age  of  the  person  whose  life  is  insured  at  the  time  of  de- 
fault of  premium  and  the  assumption  of  mortality  and  interest 
aforesaid;  but  if  the  policy  shall  be  an  endowment,  payable  at 
a  certain  time,  or  at  death,  if  it  should  occur  previously,  then 
if  what  remains  as  aforesaid  shall  exceed  the  net  single  pre- 
mium of  temporary  insurance  for  the  remainder  of  the  endow- 
ment term  for  the  full  amount  of  the  policy,  such  excess  shall 
be  considered  as  a  net  Dingle  premium  for  a  pure  endowment 
of  so  much  as  such  premium  will  purchase,  determined  by  the 
age  of  the  insured  at  date  of  defaulting  the  payment  of  pre- 
mium on  the  original  policy,  and  the  table  of  mortality  and 
interest  as  aforesaid,  which  amount  shall  be  paid  at  end  of  the 
original  term  of  endowment,  if  the  insured  shall  then  be  alive. 

At  any  time  after  the  payment  of  two  or  more  full  annual 
premiums,  and  not  later  than  sixty  days  from  the  beginning 


OF    LIFE    INSURANCE.  97 

of  the  extended  insurance  provided  in  the  preceding  section, 
the  legal  holder  of  the  policy  may  demand  of  the  company, 
and  the  company  shall  issue,  its  paid-up  policy,  which,  in  case 
of  an  ordinary  life  policy,  shall  be  for  such  an  amount  as  the 
net  value  of  the  original  policy  at  the  age  and  date  of  lapse, 
computed  according  to  the  Actuaries'  or  Combined  Expe- 
rience Table  of  Mortality,  with  interest  at  the  rate  of  four  per 
cent,  per  annum,  without  deduction  of  indebtedness  on  ac- 
count of  said  policy,  will  purchase,  applied  as  a  single  pre- 
mium upon  the  table  rates  of  the  company;  and  in  case  of  a 
limited  payment  life  policy,  or  of  a  continued  payment  en- 
dowment policy,  payable  at  a  certain  time,  or  at  death,  it  shall 
be  for  an  amount  bearing  such  proportion  to  the  amount  of 
the  original  policy  as  the  number  of  complete  annual  pre- 
miums actually  paid  shall  bear  to  the  number  of  such  annual 
premiums  stipulated  to  be  paid:  Provided,  that  from  such 
amount  the  company  shall  have  the  right  to  deduct  the  net 
reversionary  value  of  all  indebtedness  to  the  company  on 
account  of  such  policy;  and  provided  further,  that  the  policy- 
holder  shall,  at  the  time  of  making  demand  for  such  paid-up 
policy,  surrender  the  original  policy,  legally  discharged,  at 
the  parent  office  of  the  company. 

If  the  death  of  the  insured  occur  within  the  term  of  tem- 
porary insurance  covered  by  the  value  of  the  policy  as  de- 
termined in  section  5856,  and  if  no  condition  of  the  insurance 
other  than  the  payment  of  premiums  shall  have  been  violated 
by  the  insured,  the  company  shall  be  bound  to  pay  the 
amount  of  the  policy,  the  same  as  if  there  had  been  no  default 
in  the  payment  of  premium,  anything  in  the  policy  to  the  con- 
trary notwithstanding:  Provided,  however,  that  notice  of  the 
claim  and  proof  of  the  death  shall  be  submitted  to  the  com- 
pany in  the  same  manner  as  provided  by  the  terms  of  the 
policy  within  ninety  days  after  the  decease  of  the  insured;  and 
provided  also,  that  the  company  shall  have  the  right  to  deduct 
from  the  amount  insured  in  the  policy  the  amount  com- 
pounded at  six  per  cent,  interest  per  annum  of  all  the  pre- 
miums that  had  been  forborne  at  the  time  of  the  decease,  in- 
cluding the  whole  of  the  year's  premium  in  which  the  death 
occurs,  but  such  premiums  shall  in  no  case  exceed  the  ordi- 
nary life  premium  for  the  age  at  issue,  with  interest,  as  last 
aforesaid. 

The  three  preceding  sections  shall  not  be  applicable  in  the 
following  cases,  to  wit:  If  the  policy  shall  have  been  issued 
by  any  company  authorized  to  do  business  in  this  State,  and 
organized  under  the  laws  of  another  State  of  the  United 
States,  which  prescribes  a  surrender  value  or  paid-up  or  tem- 
porary insurance  in  case  of  default  in  payment  of  premiums, 
and  shall  contain  an  agreement  for  such  surrender  value,  tem- 
porary or  paid-up  insurance,  as  prescribed  by  such  other 
State  as  a  part  of  said  policy,  or  if  the  policy  shall  contain  a 
provision  for  an  unconditional  cash  surrender  value  at  least 
equal  to  the  net  single  premium  for  the  temporary  insurance 
provided  hereinbefore,  or  for  the  unconditional  commutation 
of  the  policy  for  non-forfeitable  paid-up  insurance,  or  if  the 
legal  holder  of  the  policy  :hall,  within  sixty  days  after  default 
of  premium,  surrender  the  policy  and  accept  from  the  com- 
rany  another  form  of  policy,  or  if  the  policy  shall  be  sur- 
rendered to  the  company  for  a  consideration  adequate  in  the 


98  THE    THREE    SYSTEMS 

judgment  of  the  legal  holder  thereof,  then,  and  in  any  of  the 
foregoing  cases,  this  act  shall  not  be  applicable:  Provided, 
that  in  no  instance  shall  a  policy  be  forfeited  for  non-payment 
of  premiums  after  the  payment  of  three  annual  premiums 
thereon;  but  in  all  instances  where  three  annual  premiums 
shall  have  been  paid  on  a  policy  of  insurance,  the  holder  of 
such  policy  shall  be  entitled  to  paid-up  insurance,  the  net 
value  of  which  shall  be  equal  to  that  provided  for  in  section 
5856  of  this  article. — Revised  statutes,  1889,  sees.  5856-7-8  and 
sec.  5859  as  amended  in  1895. 


OF    LIFE    INSURANCE.  99 


CHAPTER  XI. 


CLASS  C.— THE  NEW  YORK  INSURANCE  LAW.— THREE  EXAMPLES 
OF  MATURED  ENDOWMENTS. — A  REMARKABLE  LIFE  INSUR- 
ANCE LAW. — EXAMPLE  IN  ILLUSTRATION. — ASSUMED  EXAM- 
PLE OF  A  TONTINE  POLICY.  — ACTUAL  EXAMPLES  OF  MATURED 
TONTINE  POLICIES. 

C    CLASS. 

This  class  embraces  all  companies  doing  business  under  the 
Level  Premium  System,  whose  policies,  in  the  main,  are  not  Non- 
Forfeitable;  that  is  to  say,  their  policy-holders  have  to  do  some- 
thing, WITHIN  A  SPECIFIED  TIME,  if  payment  of  premiums  be 
discontinued  after  the  first  two  or  three  years,  to  protect  their 
equities  in  the  reserve  and  surplus  accumulations  on  the  ordinary 
forms  of  policies.  It  includes  the  companies  generally  who 
issue  policies  in  which  the  deferred  dividend  element  pre- 
dominates to  a  greater  or  less  extent.  Investment,  combined 
with  Cheap  Life  Insurance,  is  a  prominent  idea  with 'the 
companies  in  this  class. 

The  dividends  paid  by  the  leading  companies  of  this  class, 
with  rare  exceptions,  if  any,  on  the  same  kind  of  policies— other 
things  being  equal — ,  are  larger  than  those  paid  by  leading 
companies  in  the  other  classes,  because  their  policies  are  for- 
feitable;  and,  generally,  any  grade  of  companies  in  this  class 
can  pay  larger  dividends  than  can  the  same  grade  of  companies 
in  the  other  classes,  for  the  same  reason.  Every  policy-holder  in- 
sured in  this  class  of  companies  must  attend  to  the  prompt  pay- 
ment of  his  premium,  ON  OR  BEFORE  12  O'CLOCK  NOON,  of  the 
day  when  it  becomes  due,  or  he  will  be  liable  to  a  greater  or  less 
loss,  according  to  the  kind  and  amount  of  his  policy,  and  the 
length  of  time  it  has  been  in  force ! 

THE  NEW  YORK  LIFE  INSURANCE  LAW. — On  the  second  of 
May,  1879,  the  Legislature  of  the  State  of  New  York  passed  what 
has  been  called,  in  some  of  our  insurance  literature,  "  The  non- 
forfeiture law  of  New  York. "  The  following  is  the  law,  and  we 
have  italicised  such  clauses  as  serve  to  make  it  wholly  useless  as  a 
non-forfeiture  act. 

"  SECTION  1. — Whenever  any  policy  of  life  insurance  hereafter 
issued  by  any  company  organized  or  incorporated  under  the  laws 


100  THE    THREE    SYSTEMS 

of  this  State,  after  being  in  force  three  full  years,  shall  by  its 
terms  lapse  or  become  forfeited  for  the  non-payment  of  any 
premium,  or  of  any  note  given  for  a  premium,  or  loan  made  in 
cash  on  the  policy  as  security,  or  of  any  interest  on  such  note  or 
loan,  unless  the  provisions  of  this  act  are  specifically  waived  in  the 
application,  and  notice  of  such  waiver  written  in  red  ink  on  the 
margin  of  the  face  of  the  policy  when  issued,  the  reserve  on  such 
policy,  including  dividend  additions,  calculated  at  the  date  of  the 
failure  to  make  any  of  the  payments  above  described,  according 
to  the  American  Experience  Table  of  Mortality,  and  with  inter- 
est at  the  rate  of  four  and  a  half  per  cent,  per  annum,  after  de- 
ducting any  indebtedness  of  the  insured  on  account  of  any 
annual,  semi-annual  or  quarterly  premium  then  due  ;  and  any 
loan  in  cash  on  such  policy,  evidence  of  which  is  acknowledged 
by  the  insured  in  writing,  shall,  on  demand  made,  with  surrender 
of  the  policy  within  six  months  after  such  lapse,  be  taken  as  a 
single  premium  of  life  insurance  at  the  published  rates  of  the 
company  at  the  time  the  policy  was  issued,  and  shall  be  applied, 
as  shall  have  been  agreed  in  the  application  and  policy,  either  to 
continue  the  insurance  of  the  policy  in  force  at  its  full  amount, 
so  long  as  such  single  premium  will  purchase  temporary  insur- 
ance for  that  amount,  at  the  age  of  the  insured  at  the  time  of 
lapse,  or  to  purchase  upon  the  same  life,  at  the  same  age,  paid  up 
insurance  payable  at  the  same  time,  and  under  the  same  condi- 
tions except  as  to  payment  of  premiums,  as  the  original  policy. 
Provided,  that  if  no  such  agreement  be  expressed  in  the  applica- 
tion and  policy,  the  said  single  premium  may  be  applied  in  either 
of  the  modes  above  specified,  at  the  option  of  the  owner  of  the 
policy ;  notice  of  such  option  to  be  contained  in  the  demand 
hereinbefore  required  to  be  made  to  prevent  the  forfeiture  of  the 
policy.  Provided,  also,  that  the  net  value  of  the  insurance  given 
for  such  single  premium  under  this  section,  computed  by  the 
standard  of  this  State,  shall  in  no  case  be  less  than  two- thirds 
of  the  entire  reserve  after  deducting  the  indebtedness  as  speci- 
fied ;  but  such  insurance  shall  not  participate  in  the  profits  of 
the  company. 

"  SEC  2. — If  the  reserve  upon  any  endowment  policy,  applied 
according  to  the  preceding  section  as  a  single  premium  of  tem- 
porary insurance,  be  more  than  sufficient  to  continue  the  insur- 
ance to  the  end  of  the  endowment  term  named  in  the  policy,  and 
if  the  insured  survive  the  term,  the  excess  shall  be  paid  in  cash 
at  the  end  of  such  term,  on  the  conditions  on  which  the  original 
policy  was  issued. 

''SEC.  3.— This  act  shall  take  effect  on  the  first  day  of 
January,  1880." 

By  the  revision  of  the  Insurance  Code  in  1892  the  phrase- 
ology of  the  law  was  slightly  changed,  without,  however, 
affecting  its  general  tenor.  The  law  now  reads: 

Whenever  any  policy  of  life  insurance  issued  after  January 
i,  1880,  by  any  domestic  life  insurance  corporation,  after  being 
in  force  three  full  years,  shall,  by  its  terms,  lapse  or  become 
forfeited  for  the  non-payment  of  any  premium  or  any  note 
given  for  a  premium  or  loan  made  in  cash  on  such  policy  as 
security,  or  of  any  interest  on  such  note  or  loan,  the  reserve 
on  such  policy  computed  according  to  the  American  Ex- 
perience Table  of  Mortality  at  the  rate  of  four  and  one-half 
per  cent,  per  annum  shall,  on  demand  made,  with  surrender 


OF    LIFE    INSURANCE.  101 

of  the  policy  within  six  months  after  such  lapse  of  forfeiture, 
be  taken  as  a  single  premium  of  life  insurance  at  the  pub- 
lished rates  of  the  corporation  at  the  time  the  policy  was 
issued,  and  shall  be  applied,  as  shall  have  been  agreed  in  the 
application  or  policy,  either  to  continue  the  insurance  of  the 
policy  in  force  at  its  full  amount  so  long  as  such  single  pre- 
mium will  purchase  temporary  insurance  for  that  amount,  at 
the  age  of  the  insured  at  the  time  of  lapse  or  forfeiture,  or  to 
purchase  upon  the  same  life  at  the  same  age  paid-up  insur- 
ance payable  at  the  same  time  and  under  the  same  conditions, 
except  as  to  payment  of  premiums,  as  the  original  policy. 
If  no  such  agreement  be  expressed  in  the  application  or 
policy,  such  single  premium  may  be  applied  in  either  of  the 
modes  above  specified  at  the  option  of  the  owner  of  the 
policy,  notice  of  such  option  to  be  contained  in  the  demand 
hereinbefore  required  to  be  made  to  prevent  the  forfeiture  of 
the  policy. 

The  reserve  hereinbefore  specified  shall  include  dividend 
additions  calculated  at  the  date  of  the  failure  to  make  any  of 
the  payments  above  described  according  to  the  American 
Experience  Table  of  Mortality  with  interest  at  the  rate  of 
four  and  one-half  per  cent  per  annum,  after  deducting  any  in- 
debtedness of  the  insured  on  account  of  any  annual  or  semi- 
annual or  quarterly  premium  then  due,  and  any  loan  made  in 
cash  on  such  policy,  evidence  of  which  is  acknowledged  by 
the  insured  in  writing. 

The  net  value  of  the  insurance  given  for  such  single  pre- 
mium under  this  section,  computed  by  the  standard  of  this 
State,  shall  in  no  case  be  less  than  two-thirds  of  the  entire 
reserve  computed  according  to  the  rule  prescribed  in  this 
section,  after  deducting  the  indebtedness  as  specified;  but 
such  insurance  shall  not  participate  in  the  profits  of  the  cor- 
poration. 

If  the  reserve  upon  any  endowment  policy  applied  accord- 
ing to  the  provisions  of  this  section  as  a  single  premium  of 
temporary  insurance  be  more  than  sufficient  to  continue  the 
insurance  to  the  end  of  the  endowment  term  named  in  the 
policy,  and  if  the  insured  survive  that  term,  the  excess  shal) 
be  paid  in  cash  at  the  end  of  such  term,  on  the  conditions  on 
which  the  original  policy  was  issued. 

This  section  shall  not  apply  to  any  case  where  the  pro- 
visions of  the  section  are  specifically  waived  in  the  application, 
and  notice  of  such  waiver  is  written  or  printed  in  red  ink  on 
the  margin  of  the  face  of  the  policy  when  issued. 

In  addition  to  New  York  the  legislatures  of  three  other 
States  have  passed  laws  relating  to  non-forfeiture,  which 
may  be  classed  in  the  same  category  as  that  State,  in  that 
they  require  some  action  on  the  part  of  the  insured  before 
becoming  effective.  The  States  referred  to  are:  California, 
Colorado  and  New  Jersey;  the  laws  being  as  follows: 

CALIFORNIA. 

Every  contract  or  policy  of  insurance  hereafter  made  by 
any  person  or  corporation  organized  under  the  laws  of  this 
State,  or  under  those  of  any  other  State  or  country,  with  and 


102  THE    THREE    SYSTEMS 

upon  the  life  of  a  resident  of  this  State,  and  delivered  within 
this  State,  shall  contain,  unless  specifically  contracted  be- 
tween the  insurer  and  the  insured  for  tontine  insurance  or  for 
other  paid-up  insurance,  a  stipulation  that  when,  after  three 
full  annual  premiums  shall  have  been  paid  on  such  policy,  it 
shall  cease  or  become  void  solely  by  the  non-payment  of  any 
premium  when  due,  its  entire  net  reserve,  by  the  American 
Experience  Mortality,  and  interest  at  four  and  one-half  per 
cent,  yearly,  less  any  indebtedness  to  the  company  on  such 
policy,  shall  be  applied  by  such  company  as  a  single  premium, 
at  such  company's  published  rates  in  force  at  the  date  of 
original  policy,  but  at  the  age  of  the  insured  at  time  of  lapse, 
either  to  the  purchase  of  non-participating  term  insurance 
for  the  full  amount  insured  by  such  policy,  or  upon  the  writ- 
ten application  by  the  owner  of  such  policy,  and  the  surrender 
thereof  to  such  company  within  three  months  from  such  non- 
payment of  premium,  to  the  purchase  of  a  non-participating 
paid-up  policy,  payable  at  the  time  the  original  policy  would 
be  payable  if  continued  in  force;  both  kinds  of  insurance  to  be 
subject  to  the  conditions,  except  as  to  payment  of  premiums, 
as  those  of  the  original  policy.  It  may  be  provided,  how- 
ever, in  such  stipulation,  that  no  part  of  such  term  insurance 
shall  be  due  or  payable  unless  satisfactory  proofs  of  death  be 
furnished  to  the  insuring  company  within  one  year  after 
death,  and  that,  if  death  shall  occur  within  three  years  after 
such  non-payment  of  premium,  and  during  such  term  of  in- 
surance, there  shall  be  deducted  from  the  amount  payable  the 
sum  of  all  the  premiums  that  would  have  become  due  on  the 
original  policy  if  it  had  continued  in  force.  If  the  reserve 
on  endowment  policies  be  more  than  enough  to  purchase 
temporary  insurance,  as  aforesaid,  to  the  end  of  the  endow- 
ment term,  the  excess  shall  be  applied  to  the  purchase  of  pure 
endowment  insurance,  payable  at  the  end  of  the  term,  if  the 
insured  be  then  living.  If  any  life  insurance  corporation  or 
company  shall  deliver  to  any  person  in  this  State  a  policy  of 
insurance  upon  the  life  of  any  person  residing  in  this  State, 
not  in  conformity  with  the  provisions  of  this  section,  the 
right  of  such  corporation  or  company  to  transact  business  in 
this  State  shall  thereupon  and  thereby  cease  and  determine, 
and  the  Insurance  Commissioner  shall  immediately  revoke  the 
certificate  of  such  corporation  or  company  authorizing  it  to 
do  business  in  this  State,  and  publish  such  revocation,  daily, 
for  the  period  of  two  weeks,  in  two  daily  newspapers,  one 
published  in  the  city  of  San  Francisco,  and  the  other  in  the 
city  of  Sacramento. — Law  of  1880. 

Note  that  while  this  law  provides  for  extended  insurance 
automatically,  its  effect  is  nullified  by  admitting  of  special 
agreement  as  to  what  shall  be  granted. 

COLORADO. 

All  life  insurance  companies,  authorized  to  transact  busi- 
ness in  this  State,  shall  provide  in  their  policies  that,  after 
three  or  more  annual  premiums  have  been  paid  upon  a  policy 
of  life  insurance,  and  default  is  made  in  payment  of ^ any  sub- 
sequent premiums  when  due,  then,  notwithstanding  such 


OF    LIFE    INSURANCE.  103 

default,  the  company  shall  convert  the  same  into  a  paid-up 
policy  for  as  many  dollars  as  the  value  of  such  policy  will 
purchase,  to  be  determined  by  the  table  of  surrender  values 
in  use  by  such  company  at  the  time  of  the  issue  of  policy, 
which  shall  not  be  less  than  the  full  net  value  of  the  policy 
per  Actuaries'  Experience  Table  of  Mortality,  four  per  cent 
interest;  provided,  that  the  application  be  made  in  writing  for 
such  paid-up  policy  by  the  assured  within  six  months  after 
default  in  the  payment  of  premiums  shall  first  have  been 
made. — Sec.  9,  chap.  2,  law  of  1883. 

NEW   JERSEY. 

1.  Whenever  any  policy  of  life  insurance  hereafter  issued 
by  any  domestic  life  insurance  corporation  of  this  State,  after 
being  in  force  three  full  years,  shall,  by  its  terms,  lapse  or  be- 
come forfeited  for  the  non-payment  of  any  premium  or  any 
note  given  for  a  premium  or  loan  made  in  cash   on   such 
policy  as  security,  or  of  any  interest  on  such  a  note  or  loan, 
the  net  reserve  on  such  policy,  including  existing  dividend 
additions,  computed  according  to  the  American  Experience 
Table  of  Mortality  at  the  rate  of  four  and  one-half  per  centum 
per  annum,  shall,  on  demand  made  in  writing,  with  the  sur- 
render of  the  policy  within  three  months  after  such  lapse  or 
forfeiture,  be  taken  as  a  single  premium  of  life  insurance  at 
the  published  rates  of  the  corporation  at  the  time  the  policy 
was  issued,  and  shall  be  applied,  as  shall  have  been  agreed  in 
the  application  or  policy,  either  to  continue  the  insurance  of 
the  policy  in  force  at  its  full  amount,  including  dividend  addi- 
tions, so  long  as  such  single  premium  will  purchase  tempo- 
rarv  insurance  for  that  amount  at  the  age  of  the  insured  at 
the  time  of  the  lapse  or  forfeiture,  or  to  purchase  upon  the 
same  life,  at  the  same  age,  paid-up  insurance,  payable  at  the 
same  time  and  under  the  same  conditions,  except  as  to  pay- 
ments of  premiums,  as  the  original  policy;  if  no  such  agree- 
ment be  expressed  in  the  application  or  policy,  such  single 
premium  may  be  applied  in  either  of  the  modes  above  speci- 
fied, at  the  option  of  the  owner  of  the  policy,  notice  of  such 
option  to  be  contained  in  the  demand  hereinafter  required  to 
be  made  to  prevent  the  forfeiture  of  the  policy. 

2.  If  there  be  any  indebtedness  on  the  policy  which  has 
been  acknowledged  by  the  assured  in  writing,  such  indebted- 
ness shall  be  paid  off  in  cash  before  the  provisions  of  this  act 
shall  be  applicable  to  the  policy. 

3.  The  net  value  of  the  insurance  given  for  such  single 
premium  under  this  act,  computed  according  to  the  American 
Experience  Table  of  Mortality,  with  interest  at  the  rate  of 
four  and  one-half  per  centum  per  annum,  shall  in  no  case  be 
less  than  two  thirds  of  the  entire  reserve,  computed  according 
to  the  rule  prescribed  in  this  act;  but  such  insurance  shall  not 
participate  in  the  profits  of  the  corporation. 

4.  If  the  reserve  upon  any  endowment  policy  applied  ac- 
cording to  the  provisions  of  this  act  as  a  single  premium  of 
temporary  insurance  be  more  than  sufficient  to  continue  the 
insurance  to  the  end  of  the  endowment  term  named  in  the 
policy,  and  if  the  insured  survive  that  term,  the  excess  shall 
be  paid  in  cash  at  the  end  of  such  term,  on  the  conditions  on 
which  the  original  policy  was  issued. 


104  THE  THREE  SYSTEMS 

5.  Any  policy  issued  by  any  insurance  company  of  this 
State  shall  be  incontestable  after  two  years  from  its  date  of 
issue   provided  all  due  premiums  have  been  paid,  except  that 
such  policy  may  be  adjusted  for  misstatement  of  age  in  the 
application  for  original  policy. 

6.  On  policies  of  prudential  or  industrial  insurance,  the 
paid-up  value  of  which,  in  accordance  herewith,  shall  be  less 
than    fifty    dollars,    it    shall    be    optional    with    the    company 
issuing   such   policy   to   pay   to  the   legal   holder   or   holders 
thereof  the  cash  equivalent;  and  upon  such  payment  the  com- 
pany shall  be  absolutely  released  from  all  further  claims  or 
demands  whatsoever  under  or  by  reason  of  said  policy,  which 
shall  thereupon  be  canceled. 

7.  The  provisions  of  this  act  shall  not  apply  to  policies 
issued  on  the  lives  of  persons  under  twelve  years  of  age  until 
three  years  after  such  persons  shall  attain  that  age. 

8.  All  acts  or  parts  of  acts  inconsistent  with  this  act  be 
and  the  same  are  hereby  repealed. — Act  of  1895. 

The  following  are  examples  of  policies  issued  by  one  of  the 
most  prominent  companies  of  the  O.  class.  The  results  speak 
for  themselves: 

POLICY  No.  49,138;  AMOUNT,  $2,000;  DATE,  JULY  11,  1866; 
AGE,  26 ;  KIND  OF  POLICY,  19-YEAR  ENDOWMENT  REQUIRING 
NINETEEN  ANNUAL  PAYMENTS  OP  $93.84,  EACH. 

The  Company  paid,  July  11,  1885 $2,000.00 

And  dividend  additions 758.90 


Total  paid  by  Company 2,758.90 

The  insured  paid  $93.84  per  year  for  19  years— of  which 
$86.05  per  annum  was  made  to  earn,  by  the  Company,  five  per 
cent,  compound  interest,  principle  and  interest  amounting,  to 
exactly  $2,759.68,  a  trifle  more  than  the  sum  paid  on  maturity  of 
endowment.  The  difference  between  $93.84  and  $86.05,  which  is 
$7.79,  was  the  annual  cost  of  the  insurance! 

(The  above  premium  was  paid  in  two  equal  semi-annual  payments  of  $46.92,  each. 

POLICY  No.  99,074  ;  AMOUNT,  $3,000  ;  DATE,  JUNE  28,  1869  ; 
AGE,  25  ;  KIND  OF  POLICY,  15- YEAR  EDDOWMENT  REQUIRING 
FIFTEEN  ANNUAL  PAYMENTS  OF  $198.06,  EACH. 

The  company  paid,  June  28,  1884. $3,000.00 

And  dividend  additions 1,030.32 

Total  paid  by  company $4,030.32 

The  insured  paid  $198.06  per  year  for  15  years— of  which 
$177. 90  per  annum  was  made  to  earn,  by  the  company,  five  per 
cent,  compound  interest,  principle  and  interest  amounting  to 
$4,030.77,  a  few  cents  more  than  the  sum  paid  on  maturity  of  en- 
dowment. The  difference  between  $198.06  and  $177.90,  which  is 
$20.16,  was  the  annual  cost  of  the  insurance! 


OF  LIFE  INSURANCE.  105 

POLICY  No.  156,482  ;  AMOUNT,  $5,000  ;   DATE,  MAY  6,  1874  ; 

AGE,  25;  KIND  OF  POLICY,  10-YEAR  ENDOWMENT  REQUIRING  TEN 

ANNUAL  PAYMENTS  OF  $540.40,  EACH. 

The  Company  paid,  May  6,  1884 .$5,000.00 

And  dividend  additions 1,066.55 


Total  paid  by  Company $6,066.55 

The  insured  paid  $540.40  per  annum  for  10  years,  of  which 
$459.36  per  annum  w^as  made  to  earn,  by  the  Company,  five  per 
cent,  compound  interest,  principle  and  interest  amounting  to 
exactly  $6066.66,  a  trifle  more  than  the  sum  paid  on  maturity  of 
the  endowment.  The  difference  between  $540.40  and  $459.36, 
which  is  $81.04,  was  the  annual  cost  of  the  insurance! 

(The  above  premium  was  paid  in  two  equal  semi-annual  payments  of  $270.20  each. 

A  very  remarkable  Life  Insurance  Law. — In  1868  a 
very  remarkable  statute  was  enacted  by  the  Legislature  of  Iowa, 
intended  as  a  complete  protection  of  the  reserves  of  policy  holders 
who  insure  in  companies  organized  under  it,  against  the  possible 
dishonesty  and  mal-feasance  of  Life  Insurance  officials.  The  law 
is  as  follows : 

SEC.  1169,  chap.  5,  of  the  Laws  of  Iowa  (code  of  1873).— "As 
soon  as  practicable  after  the  filing  of  said  statement  of  any  com- 
pany organized  or  doing  business  under  the  laws  of  this  State,  in 
the  office  of  the  Auditor  of  State,  he  shall  proceed  to  ascertain 
the  net  cash  value  of  each  policy  in  force,  upon  the  basis  of 
the  American  Experience  Table  of  Mortality,  and  four  and  a-half 
per  cent,  interest,  or  the  Actuaries'  Combined  Experience  Table  of 
Mortality,  with  interest  at  four  per  cent.  For 

the  purpose  of  making  such  valuations,  when  not  already  made 
as  aforesaid,  the  auditor  may  employ  a  competent  actuary  to  do 
the  same,  who  shall  be  paid  by  the  company  for  which  the  service 
was  rendered;  but  nothing  herein  shall  prevent  any  company  from 
making  said  valuation  herein  contemplated,  which  shall  be  re- 
ceived by  the  auditor  upon  such  proof  as  he  may  determine. 
Upon  ascertaining  the  net  cash  value  of  policies  in  force  in  any 
company  organized  under  the  laws  of  this  State,  or  doing  business 
in  this  State,  and  which  has  not  made  the  deposit  required  in 
Section  1164  of  this  chapter"— (refers  to  the  requirements  of  the 
States  under  whose  laws  the  foreign  companies  were  incorpora- 
ted)—"the  auditor  shall  notify  said  company  of  the  amount,  and 
within  thirty  days  after  the  date  of  such  notification  the  officers 
of  such  company  shall  deposit  with  the  auditor  the  amount  of 
such  ascertained  valuation  of  all  policies  within  this  State  in 
the  securities  described  in  section  1179  of  this  chapter." 

RESERVE  DEPOSIT  feature  of  the  foregoing  law;  to  illlustrate 
this  we  give  the  following  example  of  a  policy  in  force: 

POLICY,  No.  1857;  AMOUNT,  $3,000;  AGE,  18;  DATE  OF 
POLICY,  MARCH  14,  1874  ;  KIND  OF  POLICY,  ORDINARY  LIFE 

KKQUIRING  THE  PAYMENT  OF  $26.78,  SEMI- ANNUALLY,  DURING 
LIFE. 


106  THE  THREE   SYSTEMS 

On  this  policy  the  dividends  have  been  applied  to  the  purchase  of 
paid-up  additions. 

Dividend,    1875,  end    1st  year,  19.9  per  cent,   of 

annual  premium $10 . 68 

Paid-up  addition    to  policy 40.52 

Dividend,  1876,  end2d  year,  25.5  percent,  of  an- 
nual premium " $13.71 

Paid-up  addition    to  policy 51.82 

Dividend,  1877,  end  3d  year,  26. 3  per  cent,  of  an- 
nual premium $14.12 

Paid-up  addition  to  policy 52.38 

Dividend,  1878,  end  4th  year,  27.9  per  cent,  of  an- 
nual premium $14.98 

Paid-up  addition   to  policy 54.52 

Dividend,  1879,  end  5th year,  29.9  percent,  of  an- 
nual premium $16.06 

Paid-up  addition   to  policy 57.35 

Dividend,  1880,  end  6th  year,  30.8  percent,  of  an- 
nual premium $16.54 

Paid-up  addition   to  policy 57.90 

Dividend,  1881,  end  7th  year,  32.8  percent,  of  an- 
nual premium $17.60 

Paid-up  addition   to  policy 60.45 

Dividend,  1882,  end  8th  year,  34. 6  per  cent,  of  an- 
nual premium 3*18.55 

Paid-up  addition    to  policy 62.55 

Dividend,  1883,  end  9th  year,  36  per  cent,  of  an- 
nual premium $19.50 

Paid  up  addition   to  policy 64.35 

Dividend,  1884,  end  10th  year,  37. 9  per  cent,  of  an- 
nual premium $20 . 35 

Paid-up  addition  to  policy 65 . 70 

Dividend,  1885,  end  llth  year,  40  per  cent,  of  an- 
nual premium $21 .46 

Paid-up  addition    to  policy 68.00 

Total  additions  in  11  years $635.54 

Total  premiums  paid  in  11  years. . .     589.16 

Excess  of  additions  over  premiums  paid..  $46.38 

Remark — At  the  end  of  the  llth  policy  year  the  reserve  of 
policy  and  additions,  according  to  the  Actuaries'  Table,  and  4  % 
interest,  the  standard  required  by  the  State,  amounted  to  $415.94! 
This  amount,  according  to  the  preceding  law,  is  now  deposited  in 
the  office  of  the  State  Auditor,  in  securities  prescribed  by  legisla- 
tive enactment. 

DEPOSIT  LAW   OF   INDIANA. 

In  the  year  1899  the  Indiana  legislature  passed  an  act 
regulating  life  insurance  in  that  State,  which  includes  the 
following  section  relating  to  compulsory  deposit  of  the  re- 
serves: 

SEC.  10. — As  soon  as  practicable,  after  the  filing  of  said 
annual  statement  of  any  company  organized  and  doing  busi- 
ness under  the  provisions  of  this  act,  in  the  office  of  the 
Auditor  of  State,  he  shall  proceed  to  ascertain  the  net  cash 
value  of  each  policy  in  force  on  the  3ist  day  of  December 


OF    LIFE    INSURANCE. 


107 


immediately  preceding,  upon  the  basis  of  the  American  Ex- 
perience Table  of  Mortality  and  four  per  cent,  interest,  or 
Actuaries'  Combined  Experience  Table  of  Mortality  and  four 
per  cent,  interest.  For  the  purpose  of  making  such  valua- 
tions, the  Auditor  of  State  may  employ  a  competent  actuary 
to  do  the  same,  who  shall  be  paid  by  the  company  for  which 
the  services  are  rendered;  but  nothing  herein  shall  prevent 
any  company  from  making  said  valuation  herein  contem- 
plated, which  may  be  received  by  the  Auditor  of  State  upon 
such  proof  as  he  may  determine.  Upon  ascertaining  in  the 
manner  above  provided,  the  net  cash  value  of  all  policies  in 
force  in  any  company  organized  or  doing  business  under  this 
act,  the  Auditor  of  State  shall  notify  said  company  of  the 
amount  thereof  and  within  ninety  days  after  the  date  of  such 
notification  the  officers  of  such  company  shall  deposit  with 
the  Auditor  of  State  for  the  security  and  benefit  of  its  policy- 
holders,  an  amount  -hich,  together  with  the  sum  already  de- 
posited with  said  officer,  snail  be  not  less  than  the  amount  of 
such  ascertained  valuation  of  all  policies  in  force  in  the 
securities  described  in  section  twenty-two  of  this  act,  or  in 
certificates  of  deposit  in  any  solvent  bank  or  trust  company. 
But  no  companv  organized  under  this  act  shall  be  required  to 
make  such  deposit  until  the  cash  value  of  the  policies  in  force 
as  ascertained  by  the  Auditor  of  State  exceeds  the  amount 
deposited  by  said  company  under  sections  five  or  six  hereof. 

The  following  is  an  assumed  example  of  a  Deferred  Divi- 
dend policy,  with  ordinary  life  premium  rate: 

AMOUNT  OF  POLICY,  $10,000;  ANNUAL  PREMIUM,  $226.30; 
AGE  AT  ISSUE,  30;  KIND  OF  POLICY,  ORDINARY  LIFE;  DIVI- 
DEND PERIOD,  20  YEARS. 


Year. 

Annual  Pre- 
mium. 

Reserve  at  4  per 
cent.  Actuaries. 

Year. 

Annual  Pre- 
mium. 

Reserve  at  4  per 
cent.  Actuaries 

1st 

$226.30 

$    93.07 

llth 

$226.30 

$1,207.70 

2d 

226.30 

189.14 

12th 

226.30 

1,340  62 

3d 

226.30 

288.28 

13th 

226.30 

1,477.91 

4th 

226.30 

390.60 

14th 

226.30 

1,619.25 

5th 

226  30 

496.29 

15th 

226.30 

1,764.19 

6th 

226.30 

605.40 

16th 

2,6.30 

1,912.50 

7th 

226.30 

718  04 

17th 

226.30 

2,063.61 

8th 

226  30 

834.53 

18th 

226  30 

2,217.47 

9th 

22(5.30 

954  81 

19ih 

226.30 

2,373.88 

10th 

226.30 

1,079.13 

20th 

226.30 

2,532  94 

Let  it  be  assumed  that  a  person  at  age  30  has  under  considera- 
tion the  investment  in  such  a  policy  as  above  described,  and 
that  he  is  quite  favorably  inclined  to  close  the  contract.  Be 
fore  doing  so,  however,  he  should  be  quite  sure  that  he  under- 
stands it.  What  does  the  insured,  under  the  contract,  promise  to 
do  ?  The  contract  lived  up  to  on  the  part  of  the  insured,  what 
does  the  company  promise  to  do  ?  The  insured  promises  to  pay 
to  the  company  $226.30,  every  year,  during  his  natural  life,  and  to 


108  THE     THREE     SYSTEMS 

live  up  to  all  the  other  requirements  of  the  policy  contract  as  to 
occupation,  residence,  habits,  etc.,  etc.,  and  the  company  agrees 
to  pay  $10,000,  in  cash,  soon  after  his  death,  to  the  beneficiary  or 
beneficiaries  named  in  the  policy.  It  is  a  simple,  straight,  Ordi- 
nary Life  Policy  contract — with  this  addition: 

During  the  first  twenty  years  the  insured  agrees  to  pay  the 
$226.30  per  year,  in  full.  He  is  to  receive  no  dividends  during 
that  period.  If  he  die  during  the  twenty  years,  the  company 
agrees  to  pay  the  face  value  of  the  policy,  only.  If  the  in- 
sured live  only  one  single  day  less  than  the  entire  twenty 
years  from  date  of  policy,  having  paid  twenty  full  annual 
premiums,  in  cash,  only  the  face  value  of  the  policy  will 
be  paid.  He  must  not  only  pay  twenty  annual  premiums 
but  he  must  also  live  twenty  entire  years,  from  date  of  con- 
tract, and  fulfil  all  the  other  conditions  of  the  policy  contract, 
before  he  will  be  entitled  to  any  dividends  whatever.  This 
twenty  years  is  called  The  Dividend  Period. 

During  the  Dividend  Period,  all  the  dividends  that  he 
might  have  received,  and  used,  in  annual  reduction  of  pre- 
miums, had  the  policy  not  been  a  deferred  dividend  contract, 
are  accumulating  in  the  surplus  fund,  and  are  being  com- 
pounded, annually,  at  the  average  rate  of  interest,  from  year 
to  year,  realized  by  the  company  on  all  its  invested  funds. 
These  dividend  accumulations,  from  his  own  policy,  are  not 
placed  to  his  individual  credit  on  the  books  of  the  company — 
they  may  be  kept  in  memoranda — but  they  are  credited  to  the 
general  surplus  fund  of  his  class. 

If  the  policy  were  an  Ordinary  one,  not  a  Deferred  Divi- 
dend, and  the  dividends  were  to  average,  say,  $75.44  per 
annum,  and  were  left  with  the  company  to  be  compounded 
annually  at  five  per  cent,  interest,  at  the  end  of  the  twenty 
years  they  would  amount  to  $2,619.20.  This  would  be  the 
entire  amount  of  his  dividends,  from  all  sources,  under  the 
assumptions  made. 

How  much  would  the  above  result  be  increased  if  the 
policy  were  a  Deferred  Dividend,  and  the  insured  were  to 
persist  in  living  and  paying,  and  complying  with  all  the  other 
conditions  of  the  contract,  until  the  expiration  of  the  twenty- 
year  period?  Of  course  no  one  can  answer  this  question,  not 
even  the  companies  themselves,  except  approximately.  One 
company  estimated  the  amount  of  surplus  at  the  end  of  the 
dividend  period,  on  the  kind  and  amount  of  policy  assumed, 
at  $3,256.70.  This  is  $637.50  more  than  the  estimated  surplus, 
if  the  policy  were  an  annual  dividend  contract.  Another 
estimated  the  surplus  at  $4,6o.7,.oo;  or,  $2,077.80  more  than  if  it 
were  an  annual  dividend  contract.  The  first  of  the  above 


OF    LIFE    INSURANCE.  109 

companies,  in  its  sworn  testimony  before  the  Ohio  Senate 
Committee,  stated  that  the  surplus,  at  the  end  of  the  tenth 
year,  on  a  $3,000  policy  in  that  company,  issued  at  age  thirty- 
one,  was  $269.79;  that  the  dividends  paid  on  the  same  kind 
of  an  annual  dividend  policy,  same  amount  and  age,  during 
first  ten  years,  compounded  at  six  per  cent.,  amounted  to 
only  $141.42,  showing  a  difference  in  favor  of  the  first-named 
policy  of  $128.37,  or  ninety-one  per  cent.,  end  of  the  first  ten 
years.  Taking  the  statement  thus  sworn  to  by  the  company, 
as  the  basis  of  estimates  for  the  entire  dividend  period,  we 
have  the  following:  The  estimated  dividends  on  an  annual 
dividend  contract,  as  stated  before,  amount  to  $2,619.20.  Add 
ninety-one  per  cent,  and  the  result  is  $5,002.67,  the  estimated 
surplus  at  the  end  of  the  dividend  period;  but  this  result  far 
exceeds  the  estimates  of  any  company,  on  this  kind  of  policy, 
showing  plainly  that  either  our  assumptions  of  the  dividends 
are  too  high  on  an  annual  dividend  policy  in  that  company, 
or  that  the  dividends  would  not  average  as  large  during  the 
entire  twenty-year  dividend  period  as  they  did  the  first  ten 
years  of  that  period. 

Now  let  it  be  assumed  that  the  policy-holder  in  our  as- 
sumed example  has  lived  through  the  twenty-year  dividend 
period.  What  are  the  advantages  over  a  similar  annual  divi- 
dend policy,  at  the  end  of  the  first  twenty  years? 

i.     If  the  policy  were  an  annual  dividend  in  the  same  com- 
pany, he  would  have  to  apply  to  the  company  to  ascertain 
how  much  cash,   or  how  large  a  paid-up  policy,   would  be 
given  on  surrender  of  the  original  policy.   This  application  would 
have  to  be  made  before  the  twenty-first  annual  premium  became 
due,  or  the  policy  would  lapse.     It  must  be  attended  to  promptly. 
The  company  has,  in  the  reserve  accumulations,  $2,532.94,  and  we 
have  assumed  that  the  accumulated  dividends  amount  to  $2,619.20, 
making,  altogether,  $5,152.14,  in  cash,  to  the  credit  of  the  policy 
in  the  hands  of  the  company — it  is  an  annual  dividend  policy, 
remember!     How  much  of  this  $5,152.14  would  the  company 
probably  pay  the  insured,  in  cash,  on  the  legal  surrender  of  the 
policy?  Probably  not  more  than  one-half  of  it,  or  thereabouts,  say 
$^,700— possibly,  $3,000.     If  he  preferred  a,  paid  up  policy  to  the 
cash,  he  would  receive  what  the  $3,000  at  his  present  age  would 
purchase  at  the  company's  loaded  rate!     If  the  policy  were  a 
Deferred  Dividend,  how  much  cash,  or  paid-up,  would. the 
company  give  him  upon  legal  surrender  of  the  original  pol- 
icy?    One   company   guarantees  $2,173.90  in   cash,   but   esti- 
mates it  at  $5,680.     Its  estimated  equivalent  paid-up  is  $12,- 
150!      Another    company    guarantees   $2,270.05    in    cash,    but 
estimates   it   at  $7,120.     Its   estimated   equivalent   paid-up   is 


110 


THE    THREE    SYSTEMS 


$16,500!  A  third  guarantees  a  cash  surrender  value  of  $2,- 
532.94,  but  makes  no  estimates  as  to  what  it  can  probably  do 
better  than  this. 

It  is  well  to  remark  here  that  the  guarantee  cash  surrender 
values  above,  are  the  entire  reserves  as  kept  by  the  several  com- 
panies, and  the  estimated  cash  values  are  these  reserves  augmented 
by  the  estimated  surplus.  It  should  further  be  remarked  that 
when  the  cash  surrender  value  is  sufficient  to  purchase  a  larger 
paid-up  policy  than  the  original  one,  medical  examination  is  re- 
quired for  the  additional  insurance. 

(2.)  The  cash  surrender  value  or  equivalent  paid-up,  at  the 
end  of  the  Dividend  period  is  not  the  only  option  on  the  part 
of  the  insured.  There  are  several  others,  with  reference  to 
which  the  reader  is  referred  to  Chapter  V  of  this  book. 

The  following  is  the  history  of  an  early  Tontine  Policy 
issued  under  the  original  form  providing  for  absolute  for- 
feiture of  reserve  and  surplus  in  the  event  of  lapse: 

POLICY  No.  44,193;  AMOUNT  OP  POLICY  $10,000;  KIND  o* 
POLICY,  ORDINARY  LIFE,  TONTINE  POLICY;  THE  TONTINE  PERIOD, 
15  YEARS;  ANNUAL  PREMIUM,  $324.70;  AGE,  41;  DATE  OF  POLICY, 
JUNE  8th,  1869. 

During  the  Tontine  period  of  fifteen  years,  the  insured  paid 
•fifteen  annual  premiums,  in  cash,  of  $324-70  each,  amounting  to 
$4,870.50. 

At  the  end  of  the  Tontine  period  June  8th,  1884, 
the  insured  had  the  privilege  of  choosing  any  one  of 
the  following1  methods  of  settlement. 

I.  He  could  surrender  the  original  policy  to  the  Company, 
and  receive,  in  cash,  $5,530.70.    After  having  had  $10,000  insur- 
ance for  15  years  for  nothing,  he  could  retire  with  $660,  cash,  over 
and  above  the  total  sum  he  had  paid  ;  or, 

II.  He  could  surrender  the  original  Policy  and  receive  a  Paid- 
up  Policy  for  $10,260  upon  which  no  further  payment  of  pre- 
miums would  ever  be  required  ;  or, 

III.  He  could  convert  the  surplus,  $2,918.10  into  an  annuity 
for  life,  $243.50  per  year,  and  apply  it  in  annual  payment  of  fu- 
ture premiums,  thus  continuing  the  original  policy.     This  life 
annuity,  of  $243.50,  would  alone  reduce  the  annual  premium  from 
$324.70  to  $81.20,  and  the  future  annual  cash  dividends  would 
very  nearly,  if  not  quite,  pay  the  balance.     This  was  the  option 
accepted  by  the  insured  ;  and,  in  1885,  the  annuity  together  with 
the  dividend  of  1885,  more  than   paid  the  annual  premium,  so 
that  the  company  receipted  for  the  annual  premium,  and  paid 
the  insured  $17.20  in  cash. 


OF  LIFE  INSURANCE.  Ill 

At  the  end  of  the  Tontine  period,  the  options,  in  percentage^ 
were  as  follows: 

1.    Cash  surrender  value  of  the  Policy  was  1 14  per 
cent,  of  the  total  premiums  paid! 

2.  Amount  of  Paid-up  Policy  was  211  per  cent. 

of  the  total  premiums  paid  ! 

3.  The    cash  surplus  was  6O  per  cent,  of  the  total 

premiums  paid  ! 

Example  of  a  Matured  Tontine. 

Policy,  No.  114,285  ;  Amount,  $10,000  ;  Date,  May  7,  1875 ; 
Kind  of  policy,  Ordinary  Life  ;  Annual  premium,  $350.50; 
Tontine  Period,  1O  years. 

Results:  The  insured  paid  the  premiums,  in  full,  during  the 
10-YEAR  TONTINE  PERIOD,  amounting  to  $3,505.  By  the  provi- 
sions of  the  policy-contract,  at  the  end  of  the  ten  years  he  was 
entitled  to  the  benefit  of  the  following  options  : 

1.  HE     COULD   SURRENDER     HIS    POLICY     AND  RECEIVE    FROM 
THE   COMPANY,  IN  CASH,  $3,036  ;  OR, 

2.  HE   COULD  SURRENDER  HIS   POLICY  AND  RECEIVE     A  PAID- 
UP  FOR  $6,045,  NON-PARTICIPATING  ;   OR, 

3.  HE   COULD  SURRENDER    HIS     POLICY  AND  RECEIVE  AN  AN- 
NUITY FOR  LIFE  OF   $258.00,  PER  YEAR  ;  OR, 

4.  HE      COULD      SURRENDER      HIS      ACCUMULATED      SURPLUS, 
$1,255,  CONTINUING  HIS    POLICY,    AND  RECEIVE   AN  ANNUITY   FOR 
LIFE   OF   $77.00  PER  YEAR   TO    BE    USED  IN  PAYMENT   OF  FUTURE 
PREMIUMS. 

He  selected  the  second  of  the  above  options,  and  reinsured  on 
the  Tontine  plan,  May,  1885. 

Our  readers  must  not  be  misled  in  comparing  the  above  results 
with  those  of  the  15-year  Tontine  preceding  it.  There  is  no  basis 
for  accurate  comparison  of  the  two. 

TERMINABLE    ENDOWMENTS  ;     RESERVE    ENDOWMENTS  ;    A 

CERTAIN  KIND  OF  LlFE  RATE  ENDOWMENTS  ;  FlVE-YEAR  DIS- 
TRIBUTION POLICIES,  ETC.,  ETC.,  ARE  FORMS  OF  POLICY  CONTRACTS 
IN  WHICH  THE  DEFERRED  DIVIDEND  ELEMENT  PREVAILS  TO  A 
GREATER  OR  LESS  EXTENT;  BUT  TO  ILLUSTRATE  THEM  ALL,  BY 
EXAMPLES,  WOULD  REQUIRE  MORE  SPACE  THAN  A  WORK  OF 
THIS  CHARACTER  PERMITS. 

The  above  examples  illustrate  the  workings  of  the  original 
Tontine  contracts.  In  the  following  is  shown  the  values 
endorsed  on  a  modern  deferred  dividend  policy,  together 
with  an  illustration  of  the  results  which  would  have  accrued 


112 


THE  THREE   SYSTEMS 


had  such  a  policy  been  issued  twenty  years  ago.  Now  that 
the  companies  have  had  actual  experience  with  these  forms 
they  no  longer  issue  estimates,  but  submit  illustrations  of 
present  results,  with  a  warning  that  future  results  can  only 
be  in  accordance  with  future  experience. 

Ordinary  Life  Policy. — Age  of  insured,  35;  amount,  $10,- 
ooo;  annual  premium,  $281.10,  payable  for  life;  Accumulation 
or  Dividend  Period,  twenty  years. 


OF  CASH  LOANS  AND  OF  PAID-UP  OR  CONTINUED 
INSURANCE. 


AFTER  EXPIRA- 
TION OF 

Cash  Loans. 

Paid-up  Insur- 
ance. 

$10,000  INSURANCE  CON- 
TINUED FOR 

Years. 

Months. 

1  Year  

2 

2  Years  .... 

$330 

$420 

*i 

4 

3 

450 

850 

2 

8 

4 

630 

1,120 

4 

1 

5 

830 

1,410 

5 

5 

6 

980 

1,670 

6 

6 

7 

1,130 

1,950 

7 

6 

8 

1,290 

2,220 

8 

6 

9 

1,460 

2,490 

9 

5 

10 

1,620 

2,820 

10 

2 

11 

1.79C 

3070 

10 

10 

12 

1,970 

3,330 

11 

4 

13 

2,150 

3,600 

11 

10 

14 

2,330 

3,840 

12 

2 

15 

2,510 

4,200 

12 

5 

16 

2,700 

4,450 

12 

8 

17 

2,890 

4,690 

12 

10 

18 

3,080 

4,920 

12 

11 

19 

3,270 

5,150 

12 

11 

20 

3,470 

5,370 

13 

21 

3,660 

5,590 

12 

ii 

22 

3,860 

5,800 

12 

9 

23 

4,050 

6,000 

12 

6 

24 

4,250 

6,190 

12 

4 

25 

4,450 

6,380 

12 

1 

26 

4,640 

6,560 

11 

11 

27 

4,840 

6,740 

11 

8 

28 

5,030 

6,910 

11 

5 

29 

5,220 

7,070 

11 

2 

30 

5,410 

7,230 

10 

10 

OF   LIFE   INSURANCE.  113 

Guaranteed  benefits  at  end  of  twenty  years,  (a)  cash 
value,  $3,270,  or  (b)  paid-up  policy  for  $5,37°,  or  (c)  extended 
insurance  for  thirteen  years.  Estimated  dividend  at  end  of 
twenty  years,  on  basis  of  results  achieved  on  policies  matur- 
ing in  1900,  $2,660,  which  would  purchase  paid-up  insurance 
of  $4,300. 


114  THE  THREE  SYSTEMS 


CHAPTER   XII. 


THE  NATURAL  PREMIUM  SYSTEM. — ITS  DISTINGUISHING  CHAR- 
ACTERISTICS.—REQUISITES  FOR  SOUNDNESS  AND  PERMANEN- 
CY.— A  LEVEL  PREMIUM  SEPARATED  INTO  ITS  ELEMENTS. — 
A  NATURAL  PREMIUM  SEPARATED  INTO  ITS  ELEMENTS.— 
THE  Two  COMPARED.— TABLE  A,  SHOWING  RESERVE  AND 
AMOUNT  AT  RISK  ON  A  LEVEL  PREMIUM  POLICY  OF  $10,000, 
AGE  40,  FOR  27  YEARS. — REMARKS  ON  THE  SAME. — TABLE  B, 
SHOWING  RESERVE  AND  AMOUNT  AT  RISK  ON  A  NATURAL 
PREMIUM  POLICY  OF  $10,000,  AGE  40,  FOR  21  YEARS.— 
REMARKS  ON  THE  SAME.— TABLE  C,  SHOWING  THE  NET  AND 
GROSS  NATURAL  PREMIUMS  FOR  $1,000,  AGES,  20  TO  99. — 
REMARKS  ON  THE  SAME.— UNIFORM  PERCENTUM  LOADING 
DISCUSSED. 

II.     THE  NATURAL  PREMIUM  SYSTEM. 

While  the  natural  premium  system  is  thoroughly  scien- 
tific, and  therefore  perfectly  sound,  experience  has  .shown 
that  insurers  will  not  pay  a  continually  increasing  premium. 
For  temporary  insurance  the  system  meets  the  pressing  needs 
of  a  great  many  men,  but  when  the  premiums  reach  a  point 
where  they  become  burdensome,  the  insurance  is  promptly 
dropped.  As  a  matter  of  fact,  no  purely  natural  premium 
company  is  operating  in  the  United  States  at  this  time,  and 
only  a  few  ordinary  or  level-premium  companies  will  issue 
such  a  contract,  and  even  they  require  that  at  age  sixty  or 
sometimes  earlier,  the  insured  shall  change  to  a  whole-life 
level-premium  contract  if  he  still  desire  insurance. 
DISTINGUISHING  CHARACTERISTICS: 

1.  The  premium  is  required  to  be  paid  in  advance. 

2.  The  contract  between  the  company  and  the  in- 

sured is  callod  a  policy. 

3.  The  policy  always  designates  a  definite  sum  to  be  paid 

by  the  company  to  the  beneficiary  or  beneficiaries 
named  therein,  and  the  insurance  is  for  one  year 
only,  or  in  some  cases  a  fractional  part  thereof — 
two,  three  or  six  months — renewable  from  time  to 
time  at  the  option  of  the  insured,  without  medical 
examination. 


OP  LIFE   INSURANCE.  115 

4.  The  premium  is  a  "progressive  premium;"  that  is, 
it  is  larger  each  successive  year  than  the  last 
preceding  one.  But  the  increase  in  a  well 
managed  company  is  liable  to  be  impeded, 
somewhat,  so  that  each  of  the  annual  pay- 
ments, during  the  first  five  or  ten  years,  in  a 
Mutual  Company,  may  possibly  be  kept  down 
by  dividends  to  a  level,  or  nearly  so,  with 
that  of  the  third,  or  even  the  second  year. 

REQUISITES  FOR  SOUNDNESS  AND  PERMANENCY. 

a.— The  premium  must  be  based  on  safe  assumptions 
of  future  mortality,  interest  and  expenses. 

b. — There  must  be  in  hand  from  the  first  to  the  end 
of  every  policy  year,  the  reserve  provided  by 
law. 

To  illustrate, — suppose  that  the  insured  is  40  years  old  at 
the  beginning  of  a  policy  year ;  that  the  policy  is  for  $1,000, 
and  that  the  premium  is  based  on  the  Actuaries'  Table  of 
Mortality,  and  4  per  cent,  interest.  (See  Table  No.  16,  col.  6}. 
The  net  premium  at  40  is  $9.96,  and  it  is  also  the  required 
reserve.  Bear  in  mind  that  this  is  the  reserve  at  the  beginning 
of  the  year  ;  but  it  gradually  diminishes  until  at  the  end  of 
the  year  it  is  nothing  !  At  the  beginning  of  the  second  year 
he  is  41,  and  the  net  premium, — which  is  also  the  legal  re- 
serve— ,  is  now  $10.20,  which  is  also  reduced  to  zero  at  the  end  of 
the  year.  At  the  beginning  of  the  sixth  year,  at  age  45,  the 
reserve  is  $11.74,  and  nothing  at  the  end  of  the  year.  At  ages 
50,  55,  60,  65  and  70,  the  reserves  are,  respectively,  $15.33,  $20.83, 
$29.17,  $42.39,  and  $62.44,  at  the  beginning  of  each  of  the  several 
years  indicated,  but  no  reserve  is  required  at  the  terminations  of 
these  years.  Generally,  at  the  beginning  of  any  policy  year, 
the  reserve  required  by  law  in  The  Natural  Premium  Sys- 
tem, is  the  net  premium  at  the  then  age,;  but,  at  the  end  of  any 
policy  year,  no  matter  how  long  the  policy  has  been  in  force,  no 
reserve  is  required.  If  any  remains,  at  the  end  of  the  year,  it 
shows  that  the  mortality  of  the  company  during  the  year  has 
been  less  than  that  indicated  by  the  mortality  table  upon  which 
its  premiums  are  based,  and  it  is  placed  to  the  credit  of  the  sur- 
plus fund. 

c.—  The  premiums  should  be  loaded  sufficiently— see 
"loading,"  page  26— to  provide  for  any  possible 
mortality,  in  the  future,  in  excess  of  that  indi- 
cated by  the  mortality  table  upon  which  they 
are  based.  This  surplus  fund  should  be  safely 
invested,  and  the  policy  contract  should  defi- 
nitely state  how  it  will  be  invested.  To  every 


116 


THE   THREE   SYSTEMS 


policy  holder  -who  has  been  insured  a  certain 
number  of  years,  say  ten  to  fifteen,  such  a  pro- 
portional part  of  this  special  mortality  fund  as 
his  premiums  have  contributed  thereto,  to- 
gether with  interest  earned  thereon,  should  be 
available,  annually  thereafter,  in  payment  of  his 
premiums.  Should  death  occur,  or  the  policy 
lapse,  or  become  forfeited,  prior  to  the  expira- 
tion of  the  stipulated  period,  it  should  be  for- 
feited to  the  remaining"  members. 

</.— The  necessary  expenses  of  the  company  should 
be  amply  provided  for  by  collecting  from  every 
policy-holder— Quarterly,  semi-annually  or  an- 
nually, in  advance— a  uniform  fixed  amount 
for  each  $1,OOO  of  insurance  regardless  of  age. 
A  uniform  per  centum  loading  of  the  net  pre- 
mium for  expenses  in  this  system  of  insurance 
is  inequitable. 
e.—  Good  management. 

Every  life  premium,  under  The  Level  Premium  System, 
is  composed  of  three  elements,  as  follows. — (1)  THE  RESERVE 
ELEMENT  ;  (2)  THE  MORTALITY  ELEMENT  ;  (3)  THE  EXPENSE 
ELEMENT.  Table  No.  1  gives  these  elements  of  an  ORDINARY 
LIFE  PREMIUM,  for  $1,000  of  insurance,  at  every  age  from  10 
to  99,  inclusive,  according  to  THE  ACTUARIES'  TABLE  of  Mor- 
tality and  4  per  cent,  interest.  These  elements  are  thoroughly 
discussed  in  previous  pages,  commencing  at  page  65. 

Every  life  premium  under  The  Na-tural  Premium  System 
is  composed  of  two  elements. — (1)  THE  MORTALITY  ELEMENT — 
which  is  also  the  reserve — (2).  THE  EXPENSE  ELEMENT.  Table 
No.  1%  gives  these  elements  of  a  natural  premium,  for  $1,000  of 
insurance,  at  every  age  from  10  to  99,  inclusive,  according  to 
THE  ACTUARIES'  TABLE  of  Mortality,  and  4  per  cent,  interest. 

By  comparing  col.  (1),  Table  No.  lj^,with  col.  (6),  Table  No. 
16,  they  will  be  found  to  be  the  same.  That  is  to  say,  in  The 
Natural  Premium  System,  the  expressions,  legal  reserve, 
natural  net  premium,  and  mortality  element, \v lien  used  with  refer- 
ence to  the  same  gross  premium,  mean  precisely  the  same.  To 
illustrate. — The  gross  natural  premium  to  insure  $1,000  for  one 
year,  at  age  30,  is  $10.80,  reference  being  had  to  col  (3),  Table 
No.  1J£.  This  premium  is  composed  of  the  following  elements  : 

1.— MORTALITY  ELEMENT $  8.10 

2. — EXPENSE  ELEMENT 2.70 


GROSS  PREMIUM $10.80 

The  mortality  element  ($8.10),  at  the  beginning  of  the  year,  is 
also  the  legal  reserve,  and  the  net  premium  to  insure  $1,000  for 


OF   LIFE   INSURANCE. 


117 


one  year.  The  mortality  element,  the  net  premium,  and  the  legal 
reserve  are  synonymous  terms  when  applied  to  the  same  gross 
natural  premium,  at  the  beginning  of  the  year,  or  fractional  part 
thereof  designed  to  be  covered  by  the  premium. 

To  further  illustrate  the  nature  and  office  of  the  legal  reserve 
in  The  Natural  Premium  System,  and  in  what  respect  it 
differs  from  the  legal  reserve  in  The  Level  Premium  System, 
let  it  be  assumed  that  a  person,  at  age  40,  insures,  the  same  day, 
for  $10,000  under  each  system.  He  has  two  policies— one  is  for 
$10,000  on  THE  LEVEL  PREMIUM  PLAN  ;  the  other  is  for  $10,000 
on  THE  NATURAL  PREMIUM  PLAN.  He  pays,  in  advance,  to  the 
LEVEL  PREMIUM  company,  $315.70,  or  thereabouts,  and  to  the 
NATURAL  PREMIUM  company,  say,  $132.80. 

THE  LEVEL  PREMIUM  is  made  up  of  the  following  elements: 

(l.j.— THE  RESERVE  ELEMENT $138.60 

(2.). — THE  MORTALITY  ELEMENT 98.20 

(3.).— THE  EXPENSE  ELEMENT 78.90 


Gross  Level  Premium $315.7O 

THE  NATURAL  PREMIUM  is  made  up  of   the  following  ele- 
ments : 

(1.). — THE  LEGAL  RESERVE  ^ 

\ Element $  99.60 


or 


THE  MORTALITY 
or 

THE  NET  ANNUAL  PREMIUM  j 
(2.).— THE  EXPENSE  Element 33.20 


Gross  Natural  Premium $132.8O 

The  "Expectation  of  life,"  at  40,  is  a  fraction  over  27  years  ; 
call  it  27,  even.  The  two  following  tables,  A  and  B,  show  very 
clearly  the  difference  between  the  legal  reserve  of  a  Level  Pre- 
mium and  the  legal  reserve  of  a  Natural  Premium,  both  as 
to  the  offices  they  perform,  and  the  results  as  shown  in  the 
amounts  of  insurance  in  force  from  year  to  year  respectively. 

TABLE  A. 

Showing  the  legal  reserve,  and  the  amount  of  Insur- 
ance at  risk,  at  the  beginning",  and,  also,  at  the 
end  of  each  year,  on  a  Ten  Thousand  Dollar  Or- 
dinary Life  Policy  issued  at  Age  4O,  under  the 
Level  Premium  System. 


AGE. 

Beginning  of  each  Policy  Year. 

End  of  each  Policy  Year. 

Legal  Reserve, 
Actuaries' 
4  per  cent. 

Amount  of  In- 
surance, 
at  risk. 

Legal  Reserve, 
Actuaries' 
4  per  cent. 

Amount  of  In- 
surance, 
at  risk. 

40 
41 
42 
43 

Col  i. 

$236.80 
380.92 
529.93 
683.83 

Col.  2. 

$9,763.20 
9,619.08 
9,470.07 
9,316.18 

Col  3. 

$144.12 
293.13 
447.02 
605.47 

$9*35&.88 

9,706  87 
9,552.98 
9,394.55 

118 


THE    THREE   SYSTEMS 


TABLE  A.— Continued. 


Beginning  of  each  Policy  Year. 

End  of  each  Policy  Year. 

AGE. 

Legal  Reserve, 

Amount  of  In- 

Legal Reserve, 

Amount  of  In- 

Actuaries' 

surance, 

Actuaries' 

surance, 

4  per  cent. 

at  risk. 

4  per  cent. 

at  risk. 

Col.  i. 

Col.  2. 

Col.  ,. 

Col.  4. 

44    ' 

842.25 

9,157.75 

767.93 

9,232.07 

45 

1,004  73 

8,995.27 

934.17 

9,065.83 

46 

1,170.97 

8,829.03 

1,103.57 

8896.43 

47 

1,340.37 

8,659.63 

1,276.04 

8,723.96 

48 

1,512.84 

8,487.16 

1,451.38 

8,548.62 

49 

1,688.18 

8,311.82 

1,629.67 

8,370.33 

50 

1,866.47 

8,133.53 

1,810.60 

8,189.40 

51 

2,047.40 

7,952.60 

1,993.98 

8,006.02 

52 

2,230.78 

7,769.22 

2,179.61 

7,820.39 

53 

2,416.41 

7,583.59 

2,367.31 

7,632.69 

54 

2,604.11 

7,395.89 

2,557.01 

7,442.89 

55 

2,793.81 

7,206.19 

2,748.48 

7,251.52 

56 

2,985.28 

7,014.72 

2,941.44 

7,058.56 

57 

3,178  24 

6,821.76 

3,135-93 

6,864.07 

58 

3,372.73 

6,627.27 

3,331.67 

6,668.33 

59 

3,568.47 

6,431.53 

3.528.39 

6,471.61 

60 

3,765.19 

6,234.81 

3,725.41 

6,274.59 

61 

3,962.21 

6,037.79 

3,922.48 

6,077.52 

62 

4,159.28 

5,840.72 

4,119.10 

5,880.90 

63 

4,355.90 

5,644.10 

4,314.98 

5,685.02 

64 

4,551.78 

5,448.22 

4,509.67 

5,490.33 

65 

4,746.47 

5,253.53 

4,702.89 

5,297.11 

66 

4,939.69 

5,060.31 

4,894.04 

5,105.96 

67 

5,130.84 

4,869.16 

5,083.95 

4,917.05 

NOTE  1. — The  legal  reserve,  at  the  beginning  of  the  first  policy 
year,  after  payment  of  first  annual  premium,  is  $236.80,  which  is 
also  the  net  annual  premium— see  Col.  (1)  above.  The  amount 
of  insurance,  at  risk,  at  this  time,  see  Col.  (2),  is  the  face  of  ihe 
policy,  $10,000,  less  the  legal  reserve,  $236.80,  or  $9,763.20!  The 
legal  reserve  at  the  end  of  the  first  policy  year,  is  $144.12,  see 
Col.  (3),  and  the  amount  of  insurance,  at  risk,  at  this  time,  is  the 
face  value  of  the  policy,  $10,000,  less  the  legal  reserve,  $144.12, 
or  $9,855.88.  The  legal  reserve,  at  the  .beginning  of  the  second 
policy  year,  age  41,  is  the  legal  reserve  at  the  end  of  the  last  pre- 
ceding year,  $144.12,  added  to  the  net  annual  premium,  at  40, 
$236.80,  or  $380.92,  The  amount  at  risk,  at  the  beginning  of  the 
second  policy  year,  is  the  face  value  of  the  policy,  $10,000,  less 
the  legal  reserve,  $380.92,  or  $9,619.08.  The  legal  reserve  at  the 
end  of  the  second  year  is  $293. 13,  and  the  amount  of  insurance, 
at  risk,  is  the  face  value  of  the  policy,  less  the  legal  reserve,  or 
$9,706.87;  and  so  on. 

NOTE  2. — It  will  be  noticed  that  Ihe  legal  reserve  at  the  begin- 
ning of  any  policy  year  is  larger  than  at  the  end  of  the  same 
year;  compare  Col.  (1)  with  Col.  (3).  This  is  owing  to  the  fact 
that  the  legal  reserve  at  the  beginning  of  every  year  is  made  up 
of  the  legal  reserve  at  the  end  of  the  last  preceding  year  increased 


OF  LIFE   INSURANCE.  119 

by  the  net  annual  premium,  which  latter  contains  the  mortality  ele- 
ment used  in  payment  of  current  death  losses,  during  the  year. 

NOTE  8. — If  the  insured  were  to  die,  immediately  after  the 
payment  of  his  first  annual  premium,  the  company  would  pay 
$10,000.  This  $10,000  would  be  raised  from  two  sources,  (1)  the 
legal  reserve— $236.80— and  (2)  $9,763.20  from  the  mortality  ele- 
ments of  all  the  premiums  of  surviving  policy-holders.  In  other 
words,  the  insured,  himself,  would  pay  $236.80  of  his  own  policy 
If  the  insured  were  to  die  at  the  end  of  the  first  policy  year,  be^ 
fore  paying  his  second  annual  premium,  he  would  contribute 
$144.12  toward  the  payment  of  his  own  policy,  and  the  balance, 
$9,855.88,  would  come  from  the  mortality  elements  of  the  sur- 
viving policy-holders'  premiums.  By  looking  along  down 
Col.  (1),  from  age  40  to  67,  inclusive,  it  will  be  seen  how  much 
the  insured  would  contribute  to  the  payment  of  his  own  policy, 
if  death  were  to  occur  at  the  beginning  of  any  policy  year;  and, 
by  examining  the  amounts  in  Col.  (8),  it  may  be  seen  what  would 
be  contributed,  by  a  policy-holder,  insured  for  $10,000,  at  age  40, 
toward  the  payment  of  his  own  death  claim,  should  death 
occur  at  the  end  of  any  policy  year  Jiamed. 

NOTE  4. — As  has  been  said  in  preceding  pages,  over  and  over- 
again,  the  legal  reserve  under  the  Level  Premium  Sys- 
tem means  accumulation  !  In  the  above  example,  the  legal 
reserve  at  the  end  of  the  first  policy  year,  is  $144.12;  at  the  end  of 
the  fifth  policy  year,  it  is  $767.93;  at  the  end  of  the  tenth  policy 
year,  age  49,  it  is  $1,629.67,  and  so  on,  through  the  entire  27 
years  of  the  policy-holders'  expectancy— and  as  much  longer  as 
the  policy  is  kept  in  force — continually  increasing.  When  the 
insured  attains  the  age  of  67,  having  lived  out  the  full  average 
of  life,  emdpaid  his  full  share  of  death  losses  and  expenses  thus 
far,  the  company  still  has  in  its  possession  $5,082.95,  in  the 
legal  reserve,  not  one  single  penny  of  which  can  be  used,  law- 
fully, in  payment  of  the  current  death  losses  or  expenses,  until 
the  policy  on  which  it  is  accumulated  matures  by  death.  The 
policy-holder,  under  this  assumed  example,  although  the  policy  is 
$10,000,  and  it  is  spoken  of  as  being  $10,000  of  insurance,  is 
never  insured  for  $10,000!  At  the  end  of  the  first  year  his 
insurance  is  the  amount  at  risk,  or  $9,855.88,  and  this  is 
the  largest  amount  of  insurance  he  can  ever  have  under  this 
policy  contract,  unless  dividends  be  used  in  purchase  of  ad- 
ditions to  the  policy.  At  the  end  of  27  years  he  has  only 
$4,917.05  of  insurance.  If  he  were  to  live  and  keep  his  policy  in 
force  33  years  longer,  until  the  age  of  100,  the  legal  reserve  would 
then  just  equal  the  face  value  of  the  policy,  and  he  would  have 
not  one  penny  of  insurance;  or,  to  state  it  in  another  way,  he 
would  have  paid  for  his  insurance  in  full  and  the  company 
holding  his  money  would  have  nothing  at  risk, 


120  THE   THREE   SYSTEMS 

NOTE  5. — It  should  be  constantly  kept  in  mind,  when  looking 
over  the  above  table,  that  the  maximum  amount  that  the  insured 
can  ever  be  called  upon  to  pay,  in  any  one  year,  is  the  gross 
annual  premium  named  in  the  contract,  which,  in  this  as- 
sumed case,  is  $315.70.  It  may  be  less,  but  it  can  never  be  more. 
If  the  company's  mortality  be  less  than  that  indicated  by  THE 
ACTUARIES'  TABLE  OF  MORTALITY,  there  will  be  a  dividend  that 
can  be  used  in  reduction  of  this  premium.  If  the  Company  realize 
more  than  4  per  cent,  interest  on  the  reserves  in  Col.  (3),  there 
will  be  a  dividend  from  that  source.  If  the  expense  element  be 
not  all  used  from  year  to  year,  a  dividend  will  arise  from  that 
source.  Chapter  VII.  explains,  in  detail,  the  principal  sources 
of  dividends  under  The  Level  Premium  System. 

It  should  also  be  borne  in  mind,  in  this  connection,  that  every 
policy-holder  under  The  Level  Premium  System  pays  his 
share  of  the  death  losses,  in  proportion  to  the  amount  of  risk  the 
company  is  carrying  on  him.  The  amount  of  insurance  at 
risk  continually  diminishes  as  the  amount  of  legal  reserve 
increases. 

NOTE  6. — At  age  40,  the  actual  cost  to  the  company,  accord- 
ing to  THE  ACTUARIES'  TABLE  OF  MORTALITY  AND  4  PER  CENT. 
INTEREST— see  Table  No.  16— to  carry  $10,000  of  insurance,  one 
year,  is  $99.60;  at  age  67,  it  is  $494.90,  or  nearly  five  times  as 
much  as  at  40  !  Were  no  reserve  kept  in  hand  to  reduce  the 
amount  of  insurance  at  risk,  under  THE  LEVEL  PREMIUM  SYSTEM, 
the  annual  rate  of  premiums  would  necessarily  increase. 


OF  LIFE   INSURANCE. 


121 


TABLE  B. 

Showing  the  legal  reserve,  and  the  amount  of  Insur- 
ance, at  risk,  at  the  beginning-,  and,  also,  at  the 
end  of  each  year,  on  a  Ten  Thousand  Dollar  Life 
Policy  issued  at  Age  4O,  under  the  Natural  Pre- 
mium System. 


AGE. 

Beginning  of  each  Policy  Year. 

End  of  each  Policy  Year. 

Legal  Reserve, 
Actuaries' 
4  per  cent. 

Amount  of  In- 
surance 
at  risk. 

Legal  Reserve, 
Actuaries' 
4  per  cent. 

Amount  of 
Insurance 
at  risk. 

Col.    i. 

Col.    2. 

CoL  3. 

Col.  4. 

40 

$99.60 

$9,900.40 

Nothing. 

$10,000 

41 

102.00 

9,898.00 

Nothing. 

10,000 

42 

104.80 

8,955.20 

Nothing. 

10,000 

43 

108.20 

9,891.80 

Nothing. 

10,000 

44 

112.50 

9,887.50 

Nothing. 

10,000 

45 

117.40 

9882.60 

Nothing-, 

10,000 

46 

123.50 

9,876.50 

Nothing. 

10,000 

47 

130.00 

9,870.00 

Nothing. 

10,000 

48 

137.10 

9,862.90 

Nothing. 

10,000 

49 

144.80 

9,855.20 

Nothing. 

10,000 

50 

153.30 

9,846.70 

Nothing. 

10,000 

51 

162.50 

9,837.50 

Nothing. 

10,000 

52 

172.60 

9,827.40 

Nothing. 

10,000 

53 

183.60 

9,816.40 

Nothing. 

10,000 

54 

195.30 

9,804.70 

Nothing. 

10,000 

55 

208.30 

9,791.70 

Nothing. 

10,000 

56 

222.40 

9,777.60 

Nothing. 

10,000 

57 

237.30 

9.762.70 

Nothing. 

10,000 

58 

253.70 

9,746.30 

Nothing. 

10,000 

59 

271.60 

9,728.40 

Nothing. 

10,000 

60 

291.70 

9,708  30 

Nothing. 

10,000 

61 

313.60 

9,686.40 

Nothing. 

10,000 

62 

337.  7U 

9,662.30 

Nothing. 

10,000 

63 

363.80 

9,636.20 

Nothing, 

10,000 

64 

392.60 

9,607.40 

Nothing. 

10,000 

65 

423.90 

9,576.10 

Nothing. 

10,000 

66 

457.80 

9,542.20 

Nothing. 

10,000 

67 

494.90 

9,505.10 

Nothing. 

10,000 

NOTE  1. — The  legal  reserve,  at  the  beginning  of  the  first  policy 
year,  as  shown  in  Col.  (1),  is  99.60,  and  the  amount  of  insurance 
at  risk  is  $9,900.40.     At  the  end  of  the  year  the  legal  reserve 
is  nothing,  and  the  amount  of  insurance  at  risk  is  $10,000. 
The  legal  reserve  at  the  beginning  of  each  policy  year,  from 
age  40  to  age  67,  is  from  $09.60  at  the  former  age  to  $494.90 
at  the  latter  age;  but,  at  the  end  of  each  year,  no  legal  reserve 
is  required.     The  legal  reserve  at  the  beginning  of  any  policy 
year  is  used,  gradually,  in  payment  of  current  death  losses, 
until,  at  the  end  of  the  same  year,  there  is  nothing  remaining. 

The  Net  Premiums,  above,  are  obtained  by  mathematical 
calculations ;  but  the  loading  of  these  net  premiums  to  obtain  the 
corresponding  Gross  Premiums  is  entirely  arbitrary.  The 
loading  of  course  is  for  expenses,  and  every  company  has  its  own 
peculiar  notions  with  reference  to  it. 


122  •     THE   THREE    SYSTEMS 

I.— COLUMN  (5),  TABLE  No.  16  CONTAINS  ALL  THE 
ANNUAL  LEVEL  PREMIUMS,  ACCORDING  TO  THE  ACTUARIES 
TABLE  OF  MORTALITY  AND  4  PER  CENT.  INTEREST,  TO  INSURE 
$1.000  for  the  whole  of  life,  AT  AGES  FROM  10  TO  99,  IN- 
CLUSIVE. BY  LOADING  THESE  Net  Rates,  SAY  33 %  PER  CENT., 
WE  OBTAIN  COL.  (4),  TABLE  No.  1,  WHICH  CONTAINS  THE  Gross 
Annual  Level  Premiums  FOR  INSURING  THE  SAME  AMOUNTS 

AT  THE   SAME  AGES,    FOR  THE   SAME   TIME. 

II.— COLUMN  (6),  TABLE  No.  16,  CONTAINS  ALL  THE  NET 
ANNUAL  Natural  PREMIUMS,  ACCORDING  TO  THE  ACTUARIES' 
TABLE  OF  MORTALITY  AND  4  PER  CENT.  INTEREST,  TO  INSURE 
$1,000  for  one  year,  AT  AGES  FROM  10  TO  99,  INCLUSIVE.  BY 
LOADING  THESE  Net  Rates,  SAY  33 J£  PER  CENT.,  WE  OBTAIN 
COL.  (3),  TABLE  No.  1%,  WHICH  CONTAINS  THE  Gross  Annual 
Natural  Premiums  FOR  INSURING  THE  SAME  AMOUNTS,  AT 

THE  SAME  AGES,   FOR  THE   SAME   TIME. 

III.— COLUMN  (5),  TABLE  No.  17,  CONTAINS  ALL  THE  NET 
ANNUAL  Level  PREMIUMS,  ACCORDING  TO  THE  AMERICAN  EXPE- 
RIENCE TABLE  OF  MORTALITY  AND  4  PER  CENT.  INTEREST,  TO 
INSURE  $1,000  for  the  whole  of  Life,  AT  AGES  FROM  10  TO  95, 
INCLUSIVE.  BY  LOADING  THESE  Net  Rates,  SAY  33 J£  PER  CENT., 
WE  OBTAIN  THE  Gross  Annual  Level  Premiums  FOR  IN 

SURING   THE   SAME  AMOUNTS,    AT  THE  SAME  AGES,   FOR  THE    SAME 
TIME. 

IV.— COLUMN  (6),  TABLE  No.  17,  CONTAINS  ALL  THE  NET 
ANNUAL  Natural  PREMIUMS,  ACCORDING  TO  THE  AMERICAN 
EXPERIENCE  TABLE  OF  MORTALITY  AND  4  PER  CENT.  INTEREST, 
TO  INSURE  $1,000  for  one  year,  AT  AGES  FROM  10  TO  95,  INCLU- 
SIVE. BY  LOADING  THESE  Net  Rates,  SAY  33%  PER  CENT.,  WE 
OBTAIN  THE  Gross  Annual  Natural  Premiums  FOR  INSUR- 
ING THE  SAME  AMOUNT,  AT  THE  SAME  AGES,  FOR  THE  SAME 
TIME. 


OF   LIFE    INSURANCE. 

TABLE   O. 


123 


SHOWING  THE  Net  AND  Gross  NATURAL  PREMIUMS,  ACTUA 
RIBS'  4  PER  CENT.  ;  ALSO  THE  Net  AND  Gross  NATURAL 
PREMIUMS,  AMERICAN  4  PER  CENT.,  TO  INSURE  $1,000  FOR  ONE 
YEAR. 


AGE. 

ACTUARIES'  4  PER  CENT. 

AMERICAN  4  PER  CENT. 

Net  Natural  Pre- 
mium to  insure 
$1,000,  one  year. 

Gross  Natural  Pre- 
mium to  insure 
$1,000,  one  year. 

Net  Natural  Pre- 
mium to  insure 
$1,000.  one  year. 

Gross  Natural  Pre- 
mium to  insure 
$1,000,  one  year. 

Col.  T. 

Col.  2. 

Col  3. 

Col.  4. 

20 

$7.01 

$9.35 

$7.50 

$10.00 

XI 

7.09 

9.45 

7.55 

10.07 

22 

7.18 

9.57 

7.60 

10.13 

23 

7.27 

9.69 

7.65 

10.20 

24 

7.37 

9.83 

7.70 

10  27 

25 

7.47 

9.96 

7.75 

10.33 

26 

7.58 

10.11 

7.82 

10.43 

27 

7.70 

10.27 

7.88 

10.51 

28 

7.83 

10.44 

7.95 

10.60 

29 

7.96 

10.61 

8.02 

10  69 

30 

8.10 

10.80 

8.10 

10.80 

31 

8.25 

11.00 

8  18 

10.91 

32 

8.41 

11.21 

8.28 

11.04 

33 

8.58 

11.44 

8.38 

11.17 

34 

8.75 

11.67 

8.49 

11.32 

35 

8.93 

11.91 

8.60 

11.47 

36 

9.12 

12.16 

8.74 

11.65 

37 

9.31 

12.41 

8.88 

11  84 

38 

9.53 

12.71 

9.05 

12.07 

39 

9.74 

12.99 

9.22 

12.29 

40 

9.96 

13.28 

9.42 

12  56 

41 

10.20 

13  60 

9  62 

12.83 

42 

10.48 

13.97 

9.86 

13.15 

43 

10.82 

14.43 

10.11 

13.48 

44 

11.25 

15.00 

10.41 

13.88 

45 

11.74 

15.65 

10.73 

14.31 

46 

12.35 

16.47 

11.12 

14.83 

47 

13.00 

17.33 

11.54 

15.39 

48 

13.71 

18.28 

12.03 

16.04 

49 

14.48 

19.31 

12.60 

16.80 

50 

15.33 

20.44 

13  25 

17.67 

51 

16.25 

21.67 

13.98 

18.64 

52 

17.26 

23.01 

14.80 

19.  V3 

53 

18.36 

24.48 

15.71 

20.95 

54 

19.53 

26.04 

16.73 

22.31 

55 

20.83 

27.77 

17.86 

23.81 

56 

22.24 

29.65 

19.12 

25.49 

57 

23.73 

31.64 

20.52 

27.36 

58 

25.37 

33.83 

22.05 

29.40 

59 

27.16 

36.21 

23.77 

31.69 

60 

29.17 

38.89 

25.67 

34.23 

61 

31.36 

41.81 

27.77 

37.03 

62 

33.77 

45.03 

30.09 

40.12 

63 

36.38 

48.51 

32.64 

43.52 

64 

39.26 

52.35 

35.46 

47.28 

T24 


THE   THREE    SYSTEMS 


TABLE  C.— CONTINUED. 


AGE. 

ACTUARIES'  4  PER  CENT. 

AMERICAN  4  PER  CENT. 

Net  Natural  Pre- 
mium   to  insure 
$1.000,  one  year. 

Gross  Natural  Pre- 
mium   to   insure 
$1,000,  one  year. 

Net  Natural  Pre- 
mium to  insure 
$i,ooo,  one  year. 

Gross  Natural  Pre- 
mium   to   insure 
$i,ooo,  one  year 

Col.  i. 

Col.  2. 

Col  3. 

Col.    4. 

65 

$42  39 

$56.52 

$38.59 

$51.45 

66 

45.78 

61.04 

42.03 

56.04 

67 

49.49 

65.98 

45.82 

61.09 

68 

53.49 

71.32 

50.00 

66.67 

69 

57.78 

77.04 

54.58 

72.77 

70 

62.44 

83  25 

59.61 

79.48 

71 

67.46 

89.95 

65.07 

86.76 

72 

72.89 

97.18 

70.81 

94.41 

73 

78.73 

104.97 

77.09 

102.79 

74 

85.07 

113.43 

83.68 

111.57 

75 

91.89 

122.52 

90.74 

120.99 

76 

99.21 

132.28 

98.38 

131.17 

77 

107.18 

142.91 

106.79 

142.39 

78 

115  81 

154.41 

116.18 

154.91 

79 

125.06 

166.75 

126.67 

168.83 

80 

135.01 

180.01 

138.91 

185.21 

81 

145.61 

192.01 

152.89 

203.85 

82 

156.92 

209.23 

167.59 

223.45 

83 

J69.15 

225.53 

184.19 

245.59 

84 

182.38 

243.17 

203.23 

270.97 

85 

197.21 

262.95 

226.49 

301.99 

86 

213.92 

285.23 

255.46 

340.61 

87 

232  92 

310.56 

291.37 

388.49 

88 

255.07 

340.09 

333.36 

444.48 

89 

281.14 

374.85 

380.64 

507.52 

90 

311.28 

415.04 

437.06 

582.75 

91 

347.10 

462.80 

511.98 

682.64 

92 

389.68 

519.57 

609.86 

813.15 

93 

439.64 

586.19 

705.94 

941.25 

94 

496  45 

661.93 

824.18 

1,098.91 

95 

561.80 

749.07 

961.54 

1,282.05 

96 

6?3.70 

831.60 

97 

665.68 

887.57 

98 

721.15 

961.53 

99 

961.54 

1,282  05 

Note  1.— THE  GROSS  PREMIUMS  in  Table  C,  (2)  and  (4),  are  the 
NET  PREMIUMS,  (1)  and  (3\  loaded  33%  per  cent.  This  uniform 
per  centum  loading  is  not  equitable,  and  Table  C.  is  given,  -princi- 
pally, to  illustrate  that  it  is  not,  in  this  kind  of  insurance.  By 
subtracting  (1)  from  (2);  or,  (3)  from  (4),  at  any  age  in  the  table, 
the  loading  is  ascertained,  and  this  is  the  contribution,  of  every 
policy  holder  insured  for  $1,000  at  the  selected  age,  toward  the 
payment  of  the  company's  expenses  for  one  year.  By  comparing 
columns  (3)  and  (4),  it  will  be  seen  that  for  each  $1,000  of  insur- 
ance, the  expense  charge,—  loading — ,  is  as  follows  :  At  age 
twenty,  $2.50  ;  at  age  thirty,  $2.70  ;  at  age  forty,  $3.14  ;  at  age 
.fifty,  $4.42  ;  at  age  sixty,  $8.56  ;  at  age  sixty-five,  $12.86  ;  at  age 
seventy,  $19.87;  at  age  seventy-five,  $30.25;  at  age  eighty,  $46.30; 


OF    LIFE    INSURANCE.  125 

at  age  eighty -five,  $75.50,  and,  similarly,  with  reference  to  inter- 
mediate and  still  older  ages.  In  THE  NATURAL  PREMIUM  SYSTEM, 
the  premium  is  fixed  for  only  one  year.  The  next  year,  it  is 
higher  ;  and  the  next,  still  higher,  and  so  on.  It  is  rather  difficult 
to  understand  why  a  policy-holder  at  age  seventy,  insured  for 
$1,000,  should  be  required  to  pay  $19.87  as  his  proportion  of  the 
expenses  for  one  year,  while  another  policy-holder  insured  in  the 
same  company  for  the  same  amount,  at  age  forty,  is  required  to 
pay  only  $3. 14  as  his  contribution  to  the  expense  fund  for  the 
same  year.  This  inequity  is  the  result  of  a  uniform  per  centum 
loading  on  an  annually  increasing  NET  PREMIUM. 

Some  years  ago  there  began  to  be  manifested  a  pretty 
general  demand  for  cheaper  insurance.  Men  in  our  best 
business  circles  wanted  life  insurance  for  the  productive  period  of 
Ufe  in  addition  to  what  they  called  'permanent"  insurance.  To 
supply  this  demand  assessment  societies  sprang  into  existence  all 
over  this  country.  They  came  like  the  locusts  of  Egypt.  They 
were  liberally  patronized. 

For  a  few  years  the  death  rate  was  low  and  the  assessments 
few.  The  membership  believed,  as  they  were  ignorantly  taught, 
that  the  death  rate  would  never  be  much  higher,  if  any,  and 
henceforth  life  insurance  was  to  be  obtained  at  a  reasonable 
price.  These  societies  were  organized,  almost  without  excep- 
tion, by  men  ignorant  of  the  fundamental  principles  of  life  in- 
surance. The  results  were  what  every  intelligent  insurance  man 
predicted.  But  the  demand  for  cheap,  temporary  insurance  re- 
mained, and  can  only  be  furnished  on  the  same  lives  for  a 
brief  period  of  time. 


126  THE   THREE   SYSTEMS 


CHAPTER  XIII. 


THE  ASSESSMENT  SYSTEM  — ITS  DISTINGUISHING  CHARAC- 
TERISTICS.— REQUISITES  FOR  SOUNDNESS  AND  PERMA- 
NENCY.— ASSESSMENT  FAILURES. — STIPULATED  PREMIUM. 
—THE  NEW  YORK  LAW. 


III.     THE    ASSESSMENT    SYSTEM. 

The  history  of  assessment  insurance  during  the  past  twenty 
years  is  characterized  by  a  sudden  rise  to  what  was  appar- 
ently true  perfection,  followed  almost  instantly  by  a  descent 
so  rapid  as  to  wipe  out  of  existence  almost  every  prominent 
company,  leaving  only  a  few  which,  by  dint  of  accumulating 
some  sort  of  a  reserve  fund  in  their  early  years,  are  enabled 
to  pay  their  death  claims  with  some  reasonable  degree  of 
promptitude,  and  therefore  by  virtue  of  a  weakness  in  tru 
laws  manage  to  keep  out  of  the  hands  of  receivers.  Some 
companies  organized  originally  on  the  assessment  plan  wei  •• 
fortunate  enough  to  possess  managers,  who  saw  early  tl  e 
inherent  defects  of  the  system  and  set  to  work  to  place  their 
companies  on  a  surer  foundation.  These  organizations  by 
means  of  various  enabling  acts  of  the  legislature  have 
emerged  from  the  chrysalis  of  assessmentism,  and  are  now 
full-fledged  level-premium  companies,  with  every  prospect  of 
permanency.  Others  have  so  far  abandoned  the  old-time 
assessment  system  as  to  adopt  the  provisions  of  so-called 
stipulated-premium  laws,  to  which  reference  is  hereafter 
made.  Some  business  associations  still  follow  the  assess- 
ment system,  with  all  its  defects,  but  they  are  few  in  number, 
and,  from  all  indications,  will  soon  be  numbered  with  the 
hosts  that  have  gone  before.  Assessmentism  is  now  prac- 
ticed mainly  by  fraternal  orders,  and  even  these  are  groping, 
in  many  cases  blindly,  for  a  scientific  system.  The  following 
remarks,  therefore  apply  equally  to  business  assessment  asso- 
ciations and  fraternal  orders  or  societies: 


OF  LIFE  INSURANCE.  127 

ITS   DISTINGUISHING  CHARACTERISTICS. 

Premiums— usually  called  assessments -whether 
collected  before  or  after  the  death  of  a  member 
are  not  limited  except  by  the  actual  mortality 
needs  of  the  company.  Some  societies  collect 
after  each  death,  others  at  fixed  dates,  monthly, 
bi-monthly,  quarterly,  etc.,  the  amount  of  the 
assessment  being  determined  by  the  number  of 
deaths  which  have  occurred  since  the  preceding 
assessment.  Most  business  associations,,  how- 
ever, collect  stipulated  premiums  in  advance 
to  cover  the  net  cost  of  insurance,  as  indicated 
by  one  of  the  standard  mortality  tables,  and  in 
lieu  of  the  "  legal  reserve  "  incorporate  in  the 
policy  the  vested  right  of  collecting  more,  if 
necessary,  by  assessment. 

The  contract  between  the  company  or  society 
and  the  insured  is  called,  by  some  "#  Certificate 

of  Membership  "  ;   by  others,  "  a  Policy'' 

The  certificate  or  policy  is  required  under  the  laws 
of  most  of  the  States  to  designate  a  definite  sum 
to  be  paid  by  the  society  to  the  beneficiary,  but 
the  payments  to  be  made  by  the  member  to  the 
society  must  be  flexible.  When  the  premiums 
or  assessments  are  inflexible,  then  the  benefits 
under  the  certificates  must  be  flexible  or  variable. 

The  rate  of  assessment  in  one  class  of  societies  is  a 
fixed  rate ;  that  is  to  say,  the  members  are  divided 
into  classes  according  to  their  respective  ages, 
something  like  the  following,  for  instance :  All 
from  21  to  30,  inclusive,  constitute  the  First 
Class;  those  from  31  to  40,  inclusive,  the  Second 
Class  ;  those  from  41  to  48,  the  Third  Class ;  those 
from  49  to  55,  inclusive,  the  Fourth  Class;  and 
those  from  56  to  65,  inclusive,  the  Fifth  Class;  the 
classification  extending  no  further  than  age  65  ! 
Upon  the  death  of  a  member  the  rate  of  assess- 
ment for  each  $1,000  of  certificate  depends  upon 
the  class  he  is  in.  The  rate  is  fixed  at  date  of  ad- 
mission, and  remains  unchanged  so  long  as  his 
membership  continues.  In  another  class  of  socie- 
ties the  classification  may  be  the  same  but  the 
rating  changes.  For  example,  the  new  member 
may  be  28,  and  consequently,  he  is  in  the  first 
class  at  date  of  entry,  but  when  he  becomes 
31  he  is  a  member  of  the  second  class;  when 
41,  the  third  class,  and  so  on;  his  rate  of  as- 


128  THE  THREE    SYSTEMS 

sessment  being  changed  to  a  higher  one 
whenever  he  goes  from  one  class  to  another 
In  still  another  class  of  societies,  whenever 
an  assessment  is  levied,  each  member  is  as- 
sessed according  to  his  then  age,  no  matter 
what  his  age  was  when  he  entered  the 
society.  If  21  years  old  when  an  as- 
sessment is  made,  he  pays  according  to 
the  risk  the  society  is  carrying  on  him 
at  that  age ;  if  22,  the  rate  is  a  little 
higher,  because  the  risk  is  greater ;  if  23, 
the  rating  is  still  higher,  and  so  on, 
through  all  the  different  ages.  In  some  of 
these  societies  the  rating  is  a  little  higher 
than  needed  for  the  actual  current  death 
rate,  and  the  surplusage  goes  to  the  gradual 
accumulation  of  a  reserve  fund  that  may  be 
used  as  designated  in  the  certificate  of  mem- 
bership. This  voluntary  reserve  fund  is  not 
generally  available  until  the  insured  has  been 
a  member  for  several  years— five  to  fifteen 
generally— and  i5  is  called  by  different  names, 
and  is  available  at  different  times  for  various 
purposes,  according  to  the  different  ideas  of 
the  org-anizers  of  different  societies.  "We 
have  not  the  space  to  name  all,  or  one-hun- 
dredth part  of  the  different  phases  of  assess- 
ment or  fraternal  insurance  in  this  country. 
The  principles,  however,  underlying  sound 
assessment  insurance,  are  few,  and  those  we 
intend  to  make  prominent. 

REQUISITES  FOR  SOUNDNESS  AND  PERMANENCY. 

a.— "Nothing  is  more  proverbially  uncertain,"  says 
DR.  B  ABB  AGE,  "  than  the  duration  of  human  life 
when  the  maxim  is  applied  to  an  individual; 
but  there  are  few  things  less  subject  to  fluctua- 
tions than  the  average  duration  of  life  in  a 
multitude  of  individuals." 

DR.  SOUTHWOOD  SMITH  says:  "Mortality  is  sub- 
ject to  a  law  the  operation  of  which  is  as  regu- 
lar as  that  of  gravitation." 

The  concurrent  testimony  of  all  writers  on 
the  subject  of  vital  statistics  is  that  the  law  of 
mortality  is  as  certain  in  its  operations  as  are 
those  of  light,  heat,  electricity  and  chemical 
affinity.  This  law  is  epitomized  in  the  Actu- 


OF   LIFE   INSURANCE.  129 

aries',  and  the  American  Tables  of  Mortality, 
found  in  other  parts  of  this  book. 

By  the  former,  out  of  1,OOO  persons  living 
at  the  beginning-  of  a  year,  at  age  2O,  seven  die 
during  the  year  ;  at  age  3O,  eight;  at  age  4O, 
ten;  at  age  5O,  sixteen;  at  age  6O,  thirty ;  at  age 
7O,  sixty-five;  at  age  8O,  one  hundred  and  forty;  at 
age  9O,  three  hundred  and  twenty-four;  and  at  age 
99,  one  thousand! 

The  law  of  Mortality  says— and  every  com- 
pany or  society  that  disregards  it  does  so  at 
great  peril— that  $7.O1  must  be  charged  for 
$1,OOO  of  insurance,  for  one  year,  on  a  life  at 
age  2O,  besides  an  equitable  amount  for  ex- 
penses; when  that  life  attains  the  age  of  3O, 
the  sum  of  $8. 1 0  must  be  charged  for  the  same 
amount  of  insurance  for  one  year;  at  age  4O, 
the  sum  of  $9.96  must  be  charged;  at  age  5O, 
the  charge  must  be  $15.33;  at  age  6O,  not  less 
than  $29.17;  at  7O,  at  least  $62.44;  at  8O,  it 
is  not  safe  to  charge  less  than  $135.O1 ;  and  at 
9O  and  99,  for  $1,OOO  of  insurance  for  one  year, 
the  sum  of  $311.28  and  $961.54  must  be 
charged,  respectively,  and  for  intermediate 
ages,  amounts  proportional  to  the  respective 
ages. 

A  maximum  sum,  therefore,  considerably 
larger  than  that  indicated  by  the  law  of  Mor- 
tality should  be  fixed  to  begin  with  for  eack 
$1,OOO  of  insurance  at  each  age,  increasing 
every  year,  thereafter,  commensurate  with  the 
increasing  liability  of  the  member  to  die ;  and 
this  maximum  should  be  named  in  the  certifi- 
cate of  membership  as  the  basis  of  assessments 
on  any  one  person  for  any  one  year. 

The  maximum  sum  to  be  assessed,  as  above, 
should  provide  for  a  special  reserve  fund,  avail- 
able only  to  the  person  contributing  it  after 
5  to  15  or  more  years  of  consecutive  member- 
ship. If  the  certificate  were  to  lapse  before  the 
expiration  of  the  period  named  in  the  certifi- 
cate said  special  reserve  accumulations  should 
be  equitably  credited  to  persistent  members. 
This  would  operate  as  a  kind  of  cement  to 
hold  the  membership  together  and  to  reduce 
heavy  mortality  at  the  older  ages. 


> 


130  THE   THREE    SYSTEMS 

b—  The  necessary  expenses  of  a  society  should  be 
provided  for  by  the  collection,  from  each 
member,  annually  in  advance,  or  -when  an  as- 
sessment is  paid,  or  both,  regardless  of  age,  of 
a  uniform  fixed  amount  for  each  $1,OOO  of  in- 
surance named  in  the  certificate.  A  uniform 
per  centum  loading  on  an  increasing  net  pre- 
mium is  inequitable. 

c.—  Good  Management. 

Assessment  insurance  managers  were  told  repeatedly  by 
competent  authorities  that  the  system  could  not  last,  that  its 
defects  were  inherent,  and  while  for  a  few  years  losses  could 
be  paid  and  new  business  obtained  on  the  score  of  low  cost, 
yet  disaster  would  eventually  ensue.  How  true  these  pre- 
dictions were  is  now  a  matter  of  history,  and  the  list  cf  fail- 
ures is  a  long  and  gloomy  one.  No  complete  record  of  the 
associations  organized  on  this  plan  has  ever  been  kept,  mainly 
for  the  reason  that  in  the  earlier  years  the  Insurance  Depart- 
ments did  not  have  supervision  over  them.  The  New  York 
Insurance  Department's  report  prints  a  list  of  over  two 
hundred  associations  which  had  submitted  reports  at  one 
time  or  another  between  1883  and  1899,  many  of  which  con- 
fine their  operations  to  particular  occupations  or  work  in 
limited  localities.  From  that  report,  however,  it  has  been 
possible  to  compile  the  following  table  of  failed  or  retired 
associations,  most  of  which  were  active  throughout  the 
United  States: 


OF   LIFE   INSURANCE. 


131 


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132 


THE   THREE   SYSTEMS 


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OF  LIFE  INSURANCE.  133 

In  studying  this  table  it  must  be  remembered  that  the 
entire  loss  is  not  fully  expressed  by  it.  Nearly  every  com- 
pany here  referred  to  was  in  trouble  months  before  the  final 
dissolution  came,  during  which  time  the  members  deserted 
in  large  numbers.  Some  of  them  were  frozen  out  by  reason 
of  inability  to  pay  the  heavily  increased  assessments,  and 
found  themselves  so  physically  impaired  as  to  be  unable  to 
obtain  new  insurance  elsewhere.  Most  of  those  who  re- 
mained were  in  the  same  plight,  but  hoped  against  hope  that 
the  association  would  last  their  time,  only  to  find  that  the 
receiver  could  promise  them  nothing  for  all  their  outlay. 
Indeed,  in  some  cases  the  receivers  levied  assessments  to 
raise  funds  wherewith  to  pay  claims  outstanding  at  the  date 
of  failure.  Some  of  the  associations  named  in  this  list  trans-* 
ferred  their  members  to  sound  institutions,  but  that  does  not 
alter  the  fact  that  the  system,  as  a  whole,  was  found  wanting, 
and  in  transferring  their  members  these  associations  simply 
acknowledged  that  only  failure  could  result  from  a  continua- 
tion in  business. 

Stipulated  Premium  Laws. — For  a  long  time,  as  com- 
panies operating  under  the  assessment  laws  were  breaking 
loose  from  the  old  post-mortem  assessment  moorings,  there 
was  a  very  evident  searching  after  a  new  name  which  might 
more  accurately  express  what  the  companies  were  becoming. 
There  were  not  wanting  those  who  asserted  that  the  old 
name  of  assessment  was  good  enough,  since  the  distinct 
characteristic  of  the  plans  of  the  associations  was  that  any 
deficiency  in  premiums  might  be  made  good  by  assessment. 
There  were  others  who,  misled  by  the  popularity  of  the  plan, 
were  disposed  to  call  the  new  system  "Natural  Premium  In- 
surance," although  it  was  not  intended  that  it  should  be  cur- 
rent cost  or  increasing  price  insurance  at  all. 

The  plans  in  connection  with  which  these  names  were 
proposed  were  mainly  of  one  type,  viz.:  Providing  rates  of 
premium  which  were  intended  to  remain  level,  but  which 
might  be  helped  out  by  some  sort  of  an  assessment  if  a  defi- 
ciency was  found.  This  assessment  might  be  payable  in  cash, 
or  as  an  addition  to  the  regular  premium,  or  as  a  reduction 
from  the  insurance.  The  mode  of  its  payment  was  not  im- 
portant as  relates  to  the  essentials  to  the  plan.  It  must  be 
perfectly  clear  that  a  fitting  name  for  such  a  plan  is  "Stipu- 
lated Premium  Insurance." 

In  connection  with  this  idea  of  equating  or  leveling  the 
premium,  even  though  it  was  not  guaranteed  that  it  should 
remain  level,  there  naturally  arose,  after  a  time,  the  additional 


134  THE  THREE   SYSTEMS 

question  of  whether  the  plan  did  not  call  for  an  accumulation, 
and  also  whether  that  accumulation  should  not  be  a  reserve, 
mathematically  sufficient  to  help  out  the  deficiencies  of  future 
premiums.  Out  of  this  also  arose  the  inquiry  whether  an 
assessment  ought  not  to  be  made,  immediately  that  it  was 
discovered  that  this  reserve  was  not  sufficient  on  the  assump- 
tions employed  in  fixing  the  premium,  to  make  good  these 
deficiencies. 

A  number  of  companies  adopted  this  plan  before  legisla- 
tion was  enacted  on  the  subject,  and  although  they  ap- 
proached the  same  end  by  different  ways,  it  was  thought  that 
the  enactment  of  a  proper  statute  was  advisable.  Accord- 
ingly at  the  1898  session  of  the  New  York  legislature  a  stipu- 
.  lated  premium  bill  was  introduced  and  passed,  which  is  given 
in  full  herewith: 


STIPULATED    PREMIUM    LAW    OF    NEW    YORK. 

SEC.  300. — Incorporation — Thirteen  or  more  persons  may 
become  a  corporation  for  the  purpose  of  making  insurance 
upon  the  lives  or  the  health  of  persons,  and  every  insurance 
pertaining  thereto,  by  making  and  filing  in  the  office  of  the 
Superintendent  of  Insurance  a  certificate  signed  by  each  of 
them,  stating  their  intention  to  form  such  a  corporation,  and 
setting  forth  a  copy  of  the  charter  which  they  propose  to 
adopt,  which  shall  state  the  name  of  the  proposed  corpora- 
tion, the  place  where  it  is  to  be  located,  the  kind  or  kinds  of 
insurance  to  be  undertaken,  the  mode  and  manner  in  which 
its  corporate  powers  are  to  be  exercised,  the  manner  of  elect- 
ing its  directors  and  officers  (a  majority  of  whom  shall  be 
citizens  and  residents  of  this  State),  the  time  of  such  election, 
the  manner  of  filling  vacancies,  and  such  other  particulars  as 
it  may  be  necessary  to  explain  and  make  manifest  the  objects 
and  purposes  of  the  corporation.  Such  certificate  shall  be 
proved  or  acknowledged  and  recorded  in  a  book  to  be 
kept  for  that  purpose,  and  a  certified  copy  thereof  delivered 
to  the  persons  executing  the  same. 

SEC.  301. — Completion  of  Organization — Upon  receipt  of 
the  certified  copy  of  the  certificate  of  incorporation  from  the 
Superintendent  of  Insurance,  the  persons  signing  such  certi- 
ficate shall  publish  for  six  successive  weeks  in  a  paper  pub- 
lished at  Albany  in  which  notices  by  State  officers  are  re- 
quired by  law  to  be  published,  notice  of  their  intention  to 
form  such  corporation.  No  such  corporation  shall  com- 
mence the  business  of  insurance  until  at  least  two  hundred 
persons  eligible  under  the  proposed  plan  of  the  corporation 
have  subscribed  in  writing,  to  be  insured  therein  in  the  aggre- 
gate amount  of  at  least  five  hundred  thousand  dollars,  and 
have  each  paid  in  the  amount  in  cash  of  one  annual  stipulated 
net  premium  for  their  age  of  entry  on  the  amount  of  insurance 
severally  subscribed  for,  and  the  same  is  deposited  in  a  duly  in- 
corporated bank  to  the  credit  of  said  company,  to  be  held  in 
trust  for  the  benefit  of  the  members  and  beneficiaries; nor  until 
such  corporation  has  deposited  with  the  Insurance  Depart- 


OF  LIFE  INSURANCE.  135 

ment  of  the  State  of  New  York  one  hundred  thousand  dollars, 
in  such  securities  as  are  required  by  law  to  be  deposited  by  in- 
surance corporations;  and  the  Superintendent  of  Insurance 
shall  have  further  certified  that  it  has  complied  with  the  pro- 
visions of  this  article,  and  is  authorized  to  transact  the  busi- 
ness of  insurance.  The  securities  deposited  with  the  Insur- 
ance Department,  pursuant  to  this  section,  shall  be  held  by 
the  superintendent  in  trust  for  the  benefit  and  protection,  and 
as  security  for  the  policy-holders  of  the  corporation,  their 
legal  representatives  and  beneficiaries. 

SEC.  302. — Corporations  Subject  to  this  Article — Any  cor- 
poration or  association  which  issues  any  policy,  certificate  or 
other  evidence  of  interest  to,  or  makes  any  promise  or  agree- 
ment with  its  members  whereby  any  money  or  other  benefit 
is  to  be  paid  to  a  member,  or  upon  his  decease  to  his  legal 
representatives  or  the  beneficiary  designated  by  him,  which 
money  or  benefit  is  derived  from  stipulated  premiums  col- 
lected from  its  members,  or  members  of  a  class  therein,  or 
from  interest  or  accumulations,  and  wherein  the  money  or 
other  benefits  so  realized  is  applied  to  or  accumulated 
for  the  use  and  purposes  of  such  corporation  or  association 
as  herein  specified,  and  the  expenses  of  its  management  and 
prosecution  of  its  business,  shall  be  deemed  to  be  engaged  in 
the  business  of  life  insurance  upon  the  stipulated  premium 
plan  and  shall  be  subject  only  to  the  provisions  of  this  article, 
excepting  that  the  provisions  of  article  one  of  the  insurance 
law  shall  be  applicable  so  far  as  same  are  not  inconsistent  with 
the  provisions  of  this  article. 

SEC.  303. — Existing  Corporations,  Associations  or  Socie-* 
ties  Qualifying  Under  this  Article — Any  domestic  corpora- 
tion, association  or  society  existing  or  doing  business  at  the 
time  this  article  takes  effect,  may,  by  vote  of  a  majority  of  its 
board  of  directors  or  trustees,  accept  the  provisions  of  this 
article,  and  amend  its  charter  to  conform  with  the  same,  upon 
obtaining  the  consent  of  the  Superintendent  of  Insurance, 
thereto,  in  writing,  and  thereafter  it  shall  be  deemed  to  have 
been  incorporated  under  this  article;  and  every  such  corpora- 
tion, association  or  society,  in  reincorporating  or  qualifying 
under  the  provisions  of  this  article,  shall,  for  that  purpose,  so 
adopt,  in  whole  or  in  part,  a  new  charter  in  conformity  here- 
with, so  as  to  cover  and  enjoy  any  and  all  the  provisions  or 
privileges  of  existing  laws,  which  might  be  included  and  en- 
joyed, if  it  was  originally  incorporated  hereunder;  and  it 
shall,  upon  such  adoption  of  and  after  obtaining  the  consent, 
as  in  this  section  provided,  to  such  charter,  filing  the  same 
with  the  record  of  adoption  and  consent  in  the  office  of  the 
Superintendent  of  Insurance  perpetually  enjoy  the  same  as, 
and  be,  such  corporation,  and  which  is  hereby  declared  to  be 
a  continuation  of  such  corporation  which  existed  prior  to 
such  reincorporation,  and  the  offices  therein  which  shall  be 
continued  shall  be  filled  by  the  respective  incumbents  for  the 
periods  for  which  they  were  elected,  and  all  others  shall  be 
filled  in  such  manner  as  shall  be  provided  in  such  amended 
charter.  The  reincorporating  or  qualifying  of  any  existing 
domestic  corporation,  association,  or  society  under  the 
provisions  of  this  article  shall  in  no  way  annul,  modify 
or  change  any  existing  contract,  contracts  or  liabilities 
of  such  existing  corporation,  association  or  society;  and 


136  THE  THREE   SYSTEMS 

any  and  all  such  contracts  and  liabilities  shall  continue  in  full 
force  and  effect  the  same  as  though  such  corporation,  asso- 
ciation or  society  had  not  reincorporated  or  qualified  under 
this  article.  Neither  shall  the  reincorporating  or  qualifying 
of  any  such  corporation,  association  or  society,  under  the 
provisions  of  this  article,  in  any  way  prejudice,  impede  or 
impair  any  pending  action  or  proceeding,  or  any  rights  pre- 
viously accrued. 

SEC.  304. — Minimum  Premium — Every  such  corporation 
or  association  doing  business  under  the  provisions  of  this 
article  shall  charge  a  net  premium  calculated  upon  the  Com- 
bined Experience  or  Actuaries'  Table  of  Mortality,  with  in- 
terest at  the  rate  of  four  per  centum  per  annum,  equal  to  that 
of  a  yearly  term  insurance  at  the  age  of  entry.  Such  pre- 
mium shall  be  increased  by  a  loading  of  not  less  than  twenty- 
five  per  centum,  and  may  be  paid  either  annually,  semi-an- 
nually,  quarterly,  or  bi-monthly,  in  advance. 

SEC.  305. — Reserve  Fund — Every  such  corporation  or 
association  shall  accumulate,  and  at  all  times  maintain  a  re- 
serve fund  of  not  less  than  one  net  bi-monthly,  quarterly, 
semi-annual  or  annual  premium,  according  to  the  term  of 
premium  payment  of  each  policy,  upon  all  its  outstanding 
policies  and  certificates,  which  net  premium  shall  equal  the 
amount  called  for  by  the  Combined  Experience  or  Actuaries' 
Table  of  Mortality  at  the  attained  age  of  the  insured,  com- 
puted as  specified  in  section  three  hundred  and  four.  If  the 
amount  of  such  reserve  fund  is  at  any  time  reduced  to  less 
than  one  such  net  premium  upon  all  its  outstanding  policies 
and  certificates  at  the  attained  age  of  the  insured,  such  de- 
ficiency shall  be  made  up  and  restored  to  said  fund  within 
three  months  thereafter.  Should  such  impairment  of  the  re- 
serve fund  not  be  made  good  within  three  months,  then  the 
Superintendent  of  Insurance  shall  require  the  officers  of 
such  corporation  or  association  to  forthwith  notify  its  mem- 
bers to  pay  within  thirty  days  from  the  mailing  of  such  notice, 
an  extra  premium,  sufficient  to  meet  such  deficiency,  appor- 
tioned pro  rata  to  the  amount  of  their  insurance  and  to  the 
difference  between  the  actual  net  premium  paid  and  the  net 
premium  at  attained  age.  If  any  member  or  members  fail 
to  pay  such  extra  premium  within  the  time  named,  the  cor- 
poration or  association  shall  scale  down  the  policy  or  certifi- 
cate of  each  and  every  member  so  failing  to  pay  to  such  an 
amount  as  is  necessary  to  make  the  reserve  fund  to  his  credit 
equal  to  said  net  premium  on  his  insurance  remaining  in 
force,  which  amount  shall  be  the  maximum  for  which  the 
corporation  or  association  shall  be  liable  under  his  policy  or 
•certificate.  Said  thirty-day  notice  shall  clearly  state  the  pro- 
portionate amount  of  the  impairment  due  from  him,  and  shall 
contain  the  further  statement  that  in  the  event  of  failure  to 
pay  the  same  within  thirty  days  after  the  mailing  of  such 
notice,  his  policy  will  be  scaled  down  as  aforesaid.  The  pro- 
visions of  this  section  shall  not  apply  to  policies  or  certificates 
mentioned  and  described  in  sections  three  hundred  and  six  or 
tthree  hundred  and  seven. 

SEC.  306. — Limited  Payment  Policies — Any  corporation  or 
association  doing  business  under  this  article  may  issue  limited 
payment  policies  or  certificates  provided  such  policies  or 
certificates  distinctly  state  the  reserve  required  to  be  accumu- 


OF  LIFE  INSURANCE.  137 

lated  and  maintained  thereunder,  which  shall  be  computed  on 
the  net  premium  basis  according  to  the  Actuaries'  or  Com- 
bined Experience  Table  of  Mortality  with  interest  at  four  per 
centum  per  annum,  and  shall  be  held  by  and  charged  against 
such  corporation  in  lieu  of  the  reserve  provided  for  in  section 
three  hundred  and  five. 

SEC.  307. — Cash  Values — Any  corporation  or  association 
authorized  to  do  business  hereunder  may  pay  fixed  cash 
values,  provided  the  amount  of  reserve  computed  and  to  be 
set  apart  for  such  cash  value  is  plainly  stated  in  the  policy  or 
certificate,  and  provided  further  that  the  net  premium  charged 
for  such  cash  value  in  such  policy  or  certificate  shall  not  be 
less  than  an  amount  which  increased  at  four  per  centum  com- 
pound interest  will  at  the  end  of  the  period  equal  the  amount 
of  said  fixed  cash  value. 

SEC.  308. — Distribution  of  Surplus — If  the  cash  and  in- 
vested assets  of  the  corporation  exceed  the  reserve  fund  re- 
quired by  this  article,  and  the  actual  liabilities  of  said  corpo- 
ration or  association,  to  an  amount  in  excess  of  ten  per 
centum  of  such  reserve  fund,  then  the  amount  of  such  excess 
may  be  apportioned  by  the  corporation  as  a  dividend  to  mem- 
bers whose  policies  or  certificates  shall  have  been  not  less 
than  three  years  in  force,  in  reduction  of  premiums,  in  the 
purchase  of  paid-up  or  extended  insurance  or  may  be  drawn 
in  cash;  or  such  dividend  or  dividends  may  be  paid  to  the 
beneficiary  of  a  deceased  member  in  addition  to  the  face  of 
his  policy. 

SEC.  309. — Payment  of  Maximum  Amount — Every  policy 
or  certificate  hereafter  issued  by  any  corporation  doing  busi- 
ness under  this  article,  and  promising  any  payment  to  be 
made  upon  a  contingency  provided  for  in  this  article,  shall 
specify  the  sum  of  money  which  it  promises  to  pay  upon  each 
contingency  insured  against,  and  the  number  of  days  after 
satisfactory  proof  of  the  happening  of  same  on  which  such 
payment  shall  be  made.  Upon  the  occurrence  of  such  con- 
tingency, unless  the  contract  shall  have  been  avoided  by 
fraud,  or  breach  of  its  conditions,  the  corporation  shall  be 
obligated  to  the  beneficiaries  or  insured  for  such  payment^  at 
the  time  and  to  the  maximum  amount  due  under  the  policy 
or  certificate.  If  the  Superintendent  of  Insurance  shall  be 
satisfied,  upon  investigation,  that  any  such  corporation  has 
refused  or  failed  to  make  such  payment  for  thirty  days  after 
it  became  due,  and  after  proper  demand,  he  shall  notify  the 
corporation  to  issue  no  new  policies  or  certificates  until  such 
indebtedness  is  fully  paid;  and  no  officer  or  agent  of  the  cor- 
poration shall  make,  sign  or  issue  any  policy  or  certificate  of 
insurance  while  such  notice  is  in  force. 

SEC.  310. — Foreign  Corporations — No  corporation,  asso- 
ciation or  society  organized  under  the  laws  of  any  other 
State  or  Territory  of  the  United  States  or  of  the  District  of 
Columbia  or  foreign  country,  shall  transact  business  under 
the  provisions  of  this  article  until  it  has  received  from  the 
Superintendent  of  Insurance  a  certificate  of  authority  to  do 
business  in  this  State,  a  duplicate  of  which  shall  be  filed  in  his 
office.  The  Superintendent  shall  annually  issue  to  such 
foreign  corporation,  association  or  society,  renewal  certifi- 
cates of  authority  to  continue  its  business  if  it  shall  have  fully 
complied  with  the  laws  of  this  State,  and  its  annual  report  is 


138  THE  THREE    SYSTEMS 

satisfactory  to  him,  which  certificate  shall  be  filed  in  the  office 
of  the  Clerk  of  the  County  where  its  principal  office  is  located 
within  this  State,  within  sixty  days  after  the  filing  of  such 
annual  report,  and  no  such  foreign  corporation,  association  or 
society  shall  be  authorized  to  continue  such  business  after  the 
expiration  of  such  sixty  days,  unless  such  certificate  shall  have 
been  so  received  and  filed.  The  Superintendent  shall  refuse 
a  certificate  of  authority  or  renewal  of  the  same  to  any  such 
foreign  corporation,  association  or  society,  when  in  his  judg- 
ment such  refusal  would  best  promote  the  public  interest,  or 
when  by  the  laws  of  the  State  or  Territory  under  which  the 
same  is  organized  a  corporation  or  association,  of  this  State, 
doing  a  life  insurance  business  upon  the  stipulated  premium 
plan,  is  not  permitted  to  transact  such  business  in  such  other 
State  or  Territory.  When  any  State  or  Territory  shall  im- 
pose any  obligation  upon  such  corporation  or  association  of 
this  State  or  their  agents  transacting  business  in  such  other 
State  or  Territory,  the  like  obligations  are  hereby  imposed 
upon  similar  corporations,  associations  or  societies  of  such 
other  State  or  Territory,  and  their  agents  or  repre- 
sentatives, transacting  business  in  this  State,  and  such 
corporation,  association  or  society  of  such  other  State 
or  Territory,  and  their  agents  and  representatives,  shall 
pay  all  licenses,  fees  or  penalties  to  and  make  deposits 
with  the  Superintendent  of  Insurance,  imposed  by  the  laws 
of  such  other  State  or  Territory  upon  any  corporation  or 
association  of  this  State  doing  business  therein;  and  in  case  of 
failure  to  pay  the  same,  the  Superintendent  shall  refuse  the 
certificate  of  authority  herein  provided  for  or  cancel  such 
certificate  if  one  shall  have  been  previously  issued.  No 
foreign  corporation,  association,  or  society  shall  be  author- 
ized to  transact  any  business  authorized  by  this  article  within 
this  State,  unless  it  furnishes  evidence  satisfactory  to  the 
Superintendent  of  Insurance  that  it  has  a  reserve  fund  equal 
in  amount  to  that  required  by  this  article,  and  that  the  same 
is  held  for  the  benefit  of  policy  or  certificate-holders  only  and 
invested  as  required  by  the  insurance  law  of  this  State. 
Neither  shall  any  foreign  corporation,  association  or  society 
be  authorized  to  do  business  in  this  State  unless  it  collects 
for  the  benefit  of  its  policy-holders  a  net  premium  equal  at 
least  to  that  provided  for  by  the  terms  of  this  article. 

SEC.  311. — Surrender  Value  of  Lapsed  or  Forfeited  Poli- 
cies— Whenever  any  policy  or  certificate  of  life  insurance 
hereafter  issued  by  any  corporation  or  association  doing  busi- 
ness under  this  article,  after  being  in  force  five  full  years, 
shall  by  its  terms  lapse  or  become  forfeited  by  the  non-pay- 
ment of  any  premium,  or  any  note  given  for  a  premium,  or 
loan  made  in  cash  on  such  policy  as  security,  or  of  any  in- 
terest on  such  note  or  loan,  the  reserve  on  such  policy  com- 
puted according  to  the  American  Experience  Table  of  Mor- 
tality, with  interest  at  the  rate  of  four  and  one-half  per  centum 
per  annum  shall  on  demand  made  with  surrender  of  the  policy 
within  six  months  such  lapse  or  forfeiture  be  taken  as  a  single 
premium  of  life  insurance  at  the  published  rates  of  the  corpo- 
ration at  the  time  the  policy  was  issued,  and  shall  be  applied 
as  shall  have  been  agreed  in  the  application  or  policy,  either 
to  continue  the  insurance  of  the  policy  in  force  at  the  full 
amount  so  long  as  such  single  premium  will  purchase  tern- 


OF   LIFE   INSURANCE.  139 

porary  insurance  for  that  amount  at  the  age  of  the  insured  at 
the  time  of  lapse  or  forfeiture,  or  to  purchase  on  the  same  life 
at  the  same  age  paid-up  insurance  payable  at  the  same  time 
and  under  the  same  conditions,  except  as  to  payment  of  pre- 
miums, as  the  original  policy.  If  no  such  agreement  be  ex- 
pressed in  the  application  or  policy  such  single  premium  may 
be  applied  in  either  of  the  modes  above  specified  at  the  option 
of  the  owner  of  the  policy,  notice  of  such  option  to  be  con- 
tained in  the  demand  hereinbefore  required  to  be  made  to  pre- 
vent the  forfeiture  of  the  policy.  The  reserve  hereinbefore  speci- 
fied shall  include  dividend  additions  actually  made,  calculated 
at  the  date  of  the  failure  to  make  any  of  the  payments  above  de- 
scribed according  to  the  American  Experience  Table  of  Mor- 
tality, with  interest  at  four  and  one-half  per  centum  per  annum, 
after  deducting  any  indebtedness  of  the  insured  on  account  of 
any  annual,  semi-annual,  quarterly  or  bi-monthly  premium 
then  due,  and  any  loan  made  in  cash  on  such  policy,  evidence 
of  which  is  acknowledged  by  the  insured  in  writing.  The  net 
value  of  the  insurance  given  for  such  single  premium  under 
this  section  computed  by  the  standard  of  this  State  shall  in 
no  case  be  less  than  one-half  the  entire  reserve  computed 
according  to  the  rule  prescribed  in  this  section,  after  deduct- 
ing the  indebtedness  as  specified,  but  such  insurance  shall  not 
participate  in  the  profits  of  the  corporation.  This  section 
shall  not  apply  to  any  case  where  the  provisions  of  the  section 
are  specifically  waived  in  the  application. 

SEC.  312. — No  Forfeiture  of  Policy  Without  Notice — No 
life  insurance  corporation  or  association  doing  business  under 
this  article  in  this  State  shall  declare  forfeited  or  lapsed  any 
policy  hereafter  issued  or  renewed  unless  the  same  is  a  term 
insurance  contract  for  one  year  or  less,  nor  shall  any  such 
policy  be  forfeited  or  lapsed  by  reason  of  non-payment  when 
due  of  any  premium,  interest  or  instalment,  or  any  portion 
thereof,  required  by  the  terms  of  the  policy  to  be  paid  unless 
a  written  or  printed  notice  stating  the  amount  of  such  pre- 
mium, interest  or  instalment  or  portion  thereof  due,  or  to 
become  due,  on  such  policy  or  certificate,  the  place  where  it 
should  be  paid,  and  the  person  to  whom  the  same  is  payable, 
shall  have  been  duly  addressed  and  mailed  to  the  person 
whose  life  is  insured,  at  his  or  her  last  known  postoffice  ad- 
dress, postage  paid  by  the  corporation  or  by  an  officer  thereof, 
or  person  appointed  by  it  to  collect  such  premium,  at  least 
fifteen  and  not  more  than  forty-five  days  prior  to  the  day 
when  the  same  is  payable.  The  notice  shall  also  state  that 
unless  such  premium,  interest,  instalment  or  portion  thereof 
when  due  shall  be  paid  to  the  corporation  or  association  or  to 
a  duly  appointed  agent,  or  person  authorized  to  collect  such 
premium,  on  or  before  the  day  it  falls  due,  the  policy  and  all 
payments  thereon  will  become  forfeited  and  void,  except  as  to 
the  right  to  surrender  value  or  paid-up  policy  as  in  this  article 
provided.  No  such  policy  shall  in  any  case  be  forfeited  or  de- 
clared forfeited  or  lapsed  until  the  expiration  of  thirty  days 
after  the  mailing  of  such  notice.  The  affidavit  of  any  officer, 
clerk,  employee  or  agent  of  the  corporation,  or  of  any  one 
authorized  to  mail  such  notice,  that  the  notice  required  by  this 
section  has  been  dulv  addressed  and  mailed  by  the  corpora- 
tion, association  or  its  representative  shall  be  presumptive 
evidence  that  such  notice  has  been  duly  given. 


140  THE   THREE   SYSTEMS 

SEC.  313. — Discrimination  Prohibited — No  life  insurance 
corporation  or  association  subject  to  the  provisions  of  this 
article  shall  make  any  discrimination  in  favor  of  individuals 
of  the  same  class  or  of  the  same  expectation  of  life,  either  in 
the  amount  of  premiums  charged  or  in  any  return  of  pre- 
mium, dividends  or  other  advantages.  No  agent  of  such  cor- 
poration shall  make  any  contract  for  insurance  or  agreement 
as  to  such  contract  other  than  which  is  plainly  expressed  in 
the  policy  issued.  N"o  such  corporation  or  association  or 
agent  thereof  shall  pay,  or  allow,  or  offer  to  pay  or  allow,  as 
an  inducement  to  any  person  to  insure,  any  rebate  or  pre- 
mium, or  any  especial  favor  or  advantage  whatever  in  the 
dividends  to  accrue  thereon,  or  any  inducement  whatever  not 
specified  in  the  policy.  If  it  shall  appear  to  the  satisfaction 
of  the  Superintendent  of  Insurance,  after  a  hearing  by  him. 
upon  due  notice,  that  any  corporation  is  issuing  policies  or 
making  contracts  that  are  in  violation  of  this  section,  he 
shall,  upon  the  written  approval  of  the  Attorney-General,  re- 
quire such  corporation,  and  its  officers  and  agents  to  refrain, 
within  twenty  days,  from  rraking  any  such  policy  or  con- 
tract. If  cny  such  corporation  or  association,  or  officer  or 
agent  thereof,  shall  fail  to  comply  with  the  provisions  of  this 
section,  the  Superintendent  shall  institute  such  proceedings 
at  law  as  may  be  necessary  to  restrain  such  violation  of  this 
section. 

SEC.  314. — Personal  Liability— No  person  shall  incur  any 
personal  liability  for  the  losses  or  liabilities -of  any  corpora- 
tion or  association  organized  or  doing  business  under  this 
article  by  reason  of  being  a  policy  or  certificate-holder  in 
such  corporation. 

SEC.  315. — Withdrawals  of  Securities  Upon  Relinquish- 
ment  of  Business — When  any  such  corporation  shall  desire  to 
relinquish  its  business  the  Superintendent  shall,  on  applica- 
tion of  such  corporation  under  the  oath  of  its  president  or 
principal  officer  and  secretary  or  actuary,  give  notice  of  such 
intention  in  a  paper  published  at  Albany  in  which  notices  by 
said  officers  are  required  by  law  to  be  published,  at  least  twice 
a  week  for  six  months.  After  such  publication  he  shall  de- 
liver up  to  said  corporation  the  securities  held  by  him  be- 
longing to  it,  upon  being  satisfied  by  an  exhibition  of  the 
books  and  papers  belonging  to  such  corporation  and  on  ex- 
amination made  by  himself  or  by  some  competent  person  to 
be  appointed  examiner  by  him,  and  upon  the  oath  of  the 
president  or  principal  officer,  and  the  secretary  or  actuary  of 
said  corporation,  that  all  its  debts  and  liabilities  of  every 
kind  are  paid  and  extinguished  that  are  due  or  may  become 
due  upon  any  contract  or  agreement  made  by  said  corpora- 
tion. The  Superintendent  may  also  from  time  to  time  de- 
liver up  to  such  corporation  or  its  assigns  any  portion  of 
such  securities  on  being  satisfied  in  the  manner  and  form 
hereinbefore  required,  or  upon  any  other  competent  proof, 
that  all  the  debts  and  liabilities  of  every  kind  that  are  due  or 
may  become  due  are  less  than  the  amount  or  proportion  of 
such  securities  which  he  shall  still  retain. 

SEC.  316. — Change  of  Beneficiary — Membership  in  any 
such  corporation  or  association  shall  give  to  any  member 
thereof  the  right  at  any  time,  with  the  consent  of  such  corpo- 
ration or  association,  to  make  a  change  in  his  payee  or  payees 


OF   LIFE   INSURANCE.  141 

or  beneficiary  or  beneficiaries  without  requiring  the  consent 
of  such  payees  or  beneficiaries. 

SEC.  317. — Exemption  from  Execution — The  money  paid 
by  any  such  corporation  or  association  to  a  member  or  bene- 
ficiary shall  be  exempt  from  execution  and  shall  not  be  liable 
to  be  seized,  taken  or  appropriated  by  any  legal  or  equitable 
process  to  pay  any  debt  or  liability  of  a  member  or  the  widow 
or  minor  children  of  a  deceased  member  of  such  corporation 
or  association  designated  as  the  beneficiary  thereof. 

SEC.  2. — Article  ten  of  the  insurance  law  is  hereby  made 
article  eleven,  and  sections  two  hundred  and  ninety,  two 
hundred  and  ninety-one,  two  hundred  and  ninety-two  and  two 
hundred  and  ninety-three  thereof  are  hereby  renumbered,  sec- 
tions three  hundred  and  thirty,  three  hundred  and  thirty-one, 
three  hundred  and  thirty-two  and  three  hundred  and  thirty- 
three,  respectively. 

SEC.  3. — This  act  shall  take  effect  immediately. 

Other  States  speedily  followed  the  lead  of  New  York 
and  stipulated  premium  laws  are  now  in  force  in  the  States 
of  New  York,  Ohio,  Wisconsin,  Missouri,  Iowa  and  Ne- 
braska. The  principal  provisions  of  the  law  of  New  York 
may  thus  be  summarized. 

Companies  may  be  formed  under  the  act,  and  existing 
companies  may  be  rechartered  and  adopt  its  features  if  they 
choose,  but  without  prejudice  to  their  existing  contracts. 
A  "Stipulated  Premium  Plan"  company  must  have  $500,000 
of  insurance  applied  for  and  one  premium  paid  in  advance; 
the  sum  of  such  premiums  must  be  deposited  in  a  bank  for 
the  benefit  of  all  policy-holders;  $100,000  must  be  deposited 
with  Superintendent  of  Insurance  for  a  similar  purpose;  a 
reserve  fund  must  be  maintained  to  equal  at  least  one  annual 
net  premium  collected  from  all  members;  when  it  falls  below 
the  required  amount  policy-holders  are  to  be  assessed  pro 
rata  to  make  good  the  impairment,  and  if  anyone  neglects 
to  pay  his  share  his  policy  will  be  scaled  down  to  meet  the 
requirement;  companies  must  charge  a  minimum  premium 
based  on  the  Combined  Experience  Mortality  Table  and  in- 
terest at  four  per  cent.,  with  not  more  than  twenty-five  per 
cent,  loading;  companies  may  issue  limited-payment  policies 
and  provide  for  cash  surrender  values;  when  the  assets  ex- 
ceed the  required  reserve  and  all  liabilities  to  an  amount  equal 
to  ten  per  cent,  of  the  reserve,  such  excess  may  be  distributed 
among  the  policy-holders  and  used  either  in  payment  of  pre- 
miums or  to  increase  the  amount  of  insurance,  or  may  be 
taken  in  cash;  policies  in  force  five  years  may  not  be  lapsed 
for  non-payment  of  premium,  but  the  reserve  applying  to 
such  policies  shall  be  used  as  a  single  premium  to  continue 
such  insurance  in  force;  claims  must  be  paid  within  thirty 
days  after  they  become  due  or  the  Superintendent  of  Insur- 


142  THE   THREE   SYSTEMS 

ance  may  compel  the  company  to  cease  doing  business;  no 
policy-holder  assumes  any  personal  liability  because  of  his 
membership  in  such  company;  policies  cannot  be  forfeited 
for  non-payment  of  premium  without  due  notice  of  amount 
due  and  demand  for  its  payment;  the  bill  also  contains  an 
anti-discrimination  section. 

The  adoption  of  the  law  in  New  York  did  not  lead  to  any 
radical  departure  on  the  part  of  assessment  companies.  Only 
one  organization  took  advantage  of  its  provisions  and  re- 
incorporated  under  it,  and  that  step  was  speedily  followed 
by  a  second  reincorporation  under  the  level-premium  law. 
Two  years  elapsed  before  a  company  of  another  State  was 
admitted  to  New  York  under  the  stipulated  premium  law. 
In  Ohio  the  passage  of  the  law  was  followed  by  the  incor- 
poration of  a  few  new  companies,  while  one  or  two  changed 
their  plans  to  agree  with  its  provisions.  In  Missouri,  Wis- 
consin, Iowa  and  Nebraska  most  of  the  existing  assessment 
companies  have  already  reincorporated,  or  are  taking  steps 
to  that  end. 

That  the  law  is  not  satisfactory  was  speedily  shown,  some 
companies  preferring  to  go  direct  to  the  level-premium  basis 
rather  than  be  known  as  stipulated  premium  companies.  One 
difficulty  which  the  associations  incorporated  under  stipulated 
premium  laws,  encountered,  is  that  the  law  does  not  appear 
to  consider  that  stipulating  a  premium  on  an  ordinary  life 
policy  calls  for  a  reserve  larger  than  for  a  natural  premium  or 
yearly  term  policy.  Note  the  language  of  the  New  York  law: 

Reserve  Fund. — Every  such  corporation  or  association 
shall  accumulate  and  at  all  time  maintain  a  reserve  fund  of 
not  less  than  one  net  bi-monthly,  quarterly,  semi-quarterly  or 
annual  premium,  according  to  the  term  of  premium  payment 
of  each  policy,  upon  all  its  outstanding  policies  and  certifi- 
cates, which  net  premium  shall  equal  the  amount  called  for 
by  the  Combined  Experience  or  Actuaries'  Table  of  Mor- 
tality at  the  attained  age  of  the  insured,  computed  as  specified 
in  section  304.  If  the  amount  of  such  reserve  fund  is  at  any 
time  reduced  to  less  than  one  such  net  premium  upon  all  its 
outstanding  policies  and  certificates  at  the  attained  age  of  the 
insured,  such  deficiency  shall  be  made  up  and  restored  to  said 
fund  within  three  months  thereafter. 

The  section  304  referred  to  is  in  part  as  follows: 

Every  such  corporation  or  association  doing  business 
under  the  provisions  of  this  article  shall  charge  i  net  pre- 
mium calculated  upon  the  Combined  Experience  or  Act- 
uaries' Table  of  Mortality,  with  interest  at  four  per  cent,  per 
annum,  equal  to  that  of  a  yearly  term  insurance  at  age  of 
entry. 

Thus,  on  any  whole  life  policy,  whether  it  be  with  pre- 


OF   LIFE   INSURANCE.  143 

miums  stipulated  and  expected  to  be  level  or  with  annual 
term  premiums,  the  reserve  required  is  to  be  only  one  net 
premium  at  the  attained  age  for  annual  term  insurance.  This 
is  on  the  average  about  twice  the  reserve  that  is  charged  a 
regular  company  on  annual  term  insurance,  or  that  ought 
to  be  charged  these  companies;  it  is  less  by  nearly  the  whole 
amount  of  the  terminal  reserve  according  to  the  Actuaries' 
Table  than  should  be  charged  against  a  company  on  whole 
life  policies  with  premiums  that  are  expected  to  be  level.  This 
is  a  serious  matter,  as  no  assessment  to  make  good  a  de- 
ficiency need  be  levied  until  the  reserve  falls  below  these 
figures,  which  means  in  practice  until  the  fund  of  a  policy  is 
almost  exhausted.  Thus,  the  insured  may  go  on  with  a  policy 
taken  at  a  young  age,  supposing  that  a  sufficient  reserve 
according  to  law  has  been  held,  only  to  find  himself  obliged 
to  pay  for  natural  premium  insurance  at  an  advanced  age. 
This  is  the  very  evil  of  irresponsible  assessmentism  whicn 
the  framers  of  the  stipulated  premium  law  are  supposed  to 
have  desired  to  avoid.  The  consequences  of  that  sort  of 
behavior  on  the  part  of  ignorant  or  misguided  managers  have 
been  prejudicial  to  the  repute  and  interests  of  associations 
that  have  not  followed  that  course.  But  this  law  leaves 
managers  of  the  old  type  free  to  mismanage  as  of  old. 

Managers  of  associations  which  charge  lower  premiums 
than  are  necessary  according  to  the  Actuaries'  Table  and 
four  per  cent,  to  furnish  insurance  at  a  level  premium  for 
life,  have  sought  to  claim  the  virtue  of  being  up  to  the  New 
York  stan'dard.  With  many  persons  a  certificate  to  that 
effect  would  be  tantamount  to  a  certificate  both  of  solvency 
and  of  sufficiency  of  the  rates  charged,  and  the  law  is  open 
to  criticism  in  that  it  permits  companies  thus  to  virtually 
misrepresent  themselves  to  the  public  as  being  solvent  under 
the  law,  whereas  they  may  actually  be  insolvent. 

The  law  should  be  modified  and  amended  in  this  regard. 
Already  under  its  provisions  the  companies  are  held  to  the 
full  legal  reserve  on  limited  payment  policies.  They  should 
also  be  held  to  a  similar  standard  on  life  policies,  and  if  that 
is  done,  the  law  is  of  no  use  anyhow,  for  stipulated  premium 
laws  are  not  needed  for  companies  that  can  put  up  full  legal 
reserves.  If  a  company  can  and  will  do  that,  it  can  get  more 
good  out  of  compliance  with  legal  reserve  laws  and  the  repu- 
tation of  an  "old-line"  company  than  out  of  stipulated  pre- 
mium laws.  If  it  desires  to  retain  the  "safety  clause,"  there 
is  nothing  in  the  regular  company  laws  to  prevent  it,  although 
there  does  not  exist  such  a  doubt  of  the  sufficiency  of  pre- 
miums that  afford  full  legal  reserves,  as  to  call  for  a  "safety 


144  THE  THREE   SYSTEMS 

clause."  Nearly  a  dozen  companies  organized  originally  as 
assessment  institutions  have  passed  to  the  ranks  of  level- 
premium  companies,  most  of  them  without  using  the  stipu- 
lated premium  law  as  a  stepping  stone. 


OF  LIFE  INSUBANCE. 


CHAPTER  XIV. 


SYNOPSIS  OF   THE  MASSACHUSETTS  LAW  WITH  REFEKENCE   TO 
ASSESMENT  INSURANCE,  BY  INSURANCE  COMMISSIONER  JOHN 
K.  TARBOX. — His    GENERAL    REMARKS    ON    THE     SAME. — 
His   COMPARISON    OF   ASSESSMENT   INSURANCE   WITH   OLD 
LINE    INSURANCE. — CO-OPERATIVE    BUSINESS,  BY  JOHN  A. 
McCALL,  JR.,  SUPERINTENDENT  OF  THE  NEW  YORK  INSUR- 
ANCE DEPARTMENT. — CATCH-PENNY   INSTITUTIONS. — CO- 
OPERATIVE INSURANCE,  BY  EPHRAIM  WILLIAMS,  INSUR- 
ANCE  COMMISSIONER   OF   CONNECTICUT. — His    REMARKS 
ON  THE  GROUPING  OF  DIFFERENT  AGES  FOR  PURPOSES  OF 
ASSESSMENT. — FRATERNAL    ORDERS. — FRATERNAL    CON- 
GRESS MORTALITY  TABLE. 

Although,  as  stated  in  the  preceding  chapter,  assessment 
insurance,  except  as  conducted  by  fraternal  orders,  is  now 
virtually  a  thing  of  the  past,  the  lessons  taught  by  experience 
are  not  to  be  ignored,  and  the  remarks  of  the  insurance 
supervising  officials  herein  quoted  are  as  pertinent  to-day  as 
when  originally  written. 

From  the  Thirtieth  Annual  Report  of  the  Insur- 
ance Commissioner  of  the  Common-wealth  of  Massa- 
chusetts, January  1,  1885. 

"  Chapter  183  of  the  acts  of  1885  is  an  act  to  regulate  the  busi- 
ness of  life  and  health  insurance  on  the  assessment  plan  and  to 
authorize  the  formation  of  corporations  to  transact  such  insur- 
ance on  that  plan.  It  is  unique  in  some  of  its  features.  Its  pro- 
visions apply  to  all  associations,  now  or  hereafter  formed,  which 
make  assessment  insurance  contracts,  except  fraternal  societies 
and  organizations  with  select  membership,  and  unincorporated 
bodies  with  a  maximum  limit  of  five  hundred  dollars  benefit. 
Corporations  organized  under  it  cannot  transact  business  until 
two  hundred  persons  have  subscribed  for  insurance  and  paid  in 
one  full  mortuary  assessment  in  trust  f<  r  beneficiaries.  Their 
contracts  must  be  for  a  sum  specified  in  the  policy  or  contract, 
and  when  the  obligation  accrues  the  beneficiary  shall  have  a  prior 
lion,  defeated  only  by  proceedings  in  insolvency,  upon  all  the 
property  of  the  corporation  for  its  payment,  and,  if  payment  is 
not  made  within  thirty  days  after  demand,  the  corporation  upon 
notification  by  the  commissioner  shall  issue  no  policy  while 
such  notice  remains  in  force.  Policies  cannot  issue  upon  the  life 
of  any  person  over  sixty  years  of  age,  nor  for  the  benefit  of  a 
person  who  has  no  interest  in  the  insured  life.  An  assignment  to 


146  THE  THREE   SYSTEMS 

a  person  having  no  interest  in  the  insured  life  voids  the  policy. 
Each  corporation  must  provide  for  an  emergency  fund,  distinct 
from  its  ordinary  death  fund,  to  be  maintained  at  all  times,  of  an 
amount  not  less  than  the  proceeds  of  one  death  assessment  on  all 
its  policy  holders.  This  fund  is  to  constitute  a  trust  for  the  pay- 
ment of  policy  claims  not  otherwise  provided  for,  to  be  invested 
in  such  securities  as  insurance  companies  may  by  law  invest  their 
capital,  and  deposited  with  the  treasurer  of  the  commonwealth. 
These  securities  can  be  withdrawn  from  deposit  only  upon  a  req- 
uisition of  the  corporation,  endorsed  by  the  insurance  commis 
sioner,  and  for  the  purposes  of  the  trust.  When  the  corporation 
shall  cease  business  the  fund  is  to  be  administered  under  judicial 
authority  (1),  for  the  payment  of  accrued  claims,  if  any,  and  (2), 
the  payment,  in  order,  of  claims  that  shall  accrue.  Existing 
corporations  are  given  six  months  from  the  passage  of  the 
act,  and  newly  organized  corporations  six  months  from  date  of 
their  incorporation,  to  accumulate  the  fund. 

"  All  assessments  must  be  for  a  specific  purpose,  and  the  pro- 
ceeds must  be  .applied  to  the  stated  use. 

"  When  a  corporation  not  purely  mutual  neglects  without  jus- 
tifiable cause  for  thirty  days  after  proof  of  death  to  levy  an 
assessment  for  payment  of  the  claims,  the  members  of  the  cor- 
poration shall  be  personally  liable  to  the  beneficiary  for  the 
amount  due. 

"No  corporation  shall  re-insure  with  another  corporation  unless 
the  contract  therefor  shall  be  approved  by  a  two-thirds  vote  of  a 
meeting  of  the  policy-holders  held  to  consider  the  matter. 
Agents,  solicitors  and  physicians  of  any  such  corporations,  are 
liable  to  fine  and  imprisonment  for  making  wilful  false  state- 
ments or  representations  in  reference  to  insurance  therein.  The 
act  provides  for  the  admission  of  similar  corporations  of  other 
States  to  transact  business  in  Massachusetts.  To  qualify  itself 
for  such  admission  such  foreign  corporation  must  file  with  the 
insurance  department  (1),  a  certified  copy  of  its  charter ;  (2),  a 
statement  under  oath  of  its  business  for  the  preceding  year,  and 
that  it  is  paying  and  for  the  past  year  has  paid  in  full  the  maxi- 
mum amount  named  in  its  policies  ;  (3),  a  certificate  from  the 
proper  authority  in  its  State  that  like  corporations  of  this  com- 
monwealth are  legally  entitled  to  do  business  in  such  State  ;  (4), 
a  copy  of  its  policy  and  form  of  application,  which  must  show 
that  benefits  are  provided  for  by  assessments  on  policy-holders  ; 
(5),  evidence  satisfactory  to  the  commissioner  that  it  accumulates 
a  safety  or  emergency  fund  equal  in  amount,  and  of  the  charac- 
ter required  of  our  home  companies.  It  is  made  the  duty  of  the 
commissioner  to  revoke  the  authority  of  such  foreign  corpora- 
tion whenever  he  shall  be  satisfied  that  it  does  not  pay  its  policy 
obligations  in  full. 

"  The  act  defines  the  duties  and  powers  of  the  commissioner 
in  respect  to  these  corporations.  He  is  given  the  same  powers  of 
visitation  and  examination  as  in  the  case  of  life  insurance  com- 
panies under  chapter  119  of  the  Public  Statutes.  Whenever  he 
is  satisfied  that  a  corporation  has  exceeded  its  powers,  failed  to 
comply  with  any  provisions  of  law,  or  is  conducting  business 
fraudulently;  and,  whenever,  after  notice  upon  information  of  its 
default  for  thirty  days  to  pay  a  claim  due,  and  investigation  had 
thereon,  it  shall  appear  to  him  the  liabilities  of  a  corporation  ex- 
ceed its  resources,  and  that  it  cannot  within  a  reasonable  time, 
not  more  than  three  months  from  the  date  of  original  default, 
pay  its  accrued  indebtedness  in  full ;  he  shall  report  the  facts  to 
the  attorney-general,  who  shall  apply  to  the  supreme  judicial 


OF  LIFE   INSURANCE.  147 

court  for  an  injunction  and  such  other  judicial  proceedings  as  the 
interests  of  the  corporation  and  of  the  public  may  require. 

''This  legislation,  though  inadequate  for  some  important  ob- 
jects, will  effect  useful  results  in  the  care  and  prevention  of  sev- 
eral abuses  and  the  protection  of  the  public,  at  least  in  a  degree, 
from  imposition,  and  is  perhaps  as  radical  legislation  as  could  be 
secured  in  the  present  state  of  popular  feeling  and  information 
on  the  subject. 

"I  am,  however,  not  content  to  pass  the  matter  finally  with- 
out further  brief  comment.  Insurance  has  come  to  be  a  common 
need  of  our  social  life.  Corporations  engaged  in  it  serve,  in  a 
special  sense,  a  public  want,  and  are  not  to  be  regarded  or  consti 
tuted  or  left  subject  alone  to  the  laws  of  trade,  as  are  ordinary 
business  enterprises  organized  and  conducted  primarily  for  indi- 
vidual profit.  The  people  have  the  right,  which  the  State  should 
guard,  to  obtain  the  advantages  of  these  institutions  as  cheaply 
as  they  can  be  furnished,  and  that  the  institutions  should  be  con- 
structed on  the  basis  most  conservative  of  the  safety  of  the  inter- 
ests they  involve.  Corporations 
now  organized,  with  a  membership  sufficient  to  pay  a  full  maxi- 
mum benefit  from  the  proceeds  of  a  single  assessment,  will  be 
able  to  adjust  their  affairs  to  the  requirements  of  the  new  statute 
with  little  inconvenience,  since  the  old  and  new  certificates  will 
possess  the  same  actual  value.  But  corporations  with  certificates 
issued  for  a  nominal  amount,  larger  than  an  assessment  will  real- 
ize, encounter  a  difficulty  in  the  management  of  their  business 
which  may  be  overcome,  and  perhaps  not  otherwise  than  by  a 
substitution  for  the  old  certificates  of  new  certificates,  conforma- 
ble to  law,  for  a  specified  sum  as  nearly  equal  as  may  be  to  one 
assessment  collection.  This  substitution  the  present  members 
should  cheerfully  consent  to,  as  they  will  suffer  no  substantial 
injury  thereby,  and  it  seems  the  only  mode  to  secure  equality  in 
assessments.  I  entertain  no  doubt,  sufficient  to  affect  official 
action,  that  the  statute  intends  the  contract  shall  state  precisely 
and  unconditionally  the  sum  to  which  the  beneficiary  under  it  is 
entitled,  and  that  any  form  of  contract  which  left  the  amount  to 
be  paid  dependent  upon  uncertain  conditions,  as  the  more  or  less 
proceeds  of  an  assessment,  would  be  judiciously  held  an  unlawful 
evasion  of  the  statute." 

Under  the  head  of  Beneficiary  and  Assessment  Insurance 
Corporations,  the  Commissioner  said: 

"  The  department  has  unofficial  information  of  several  asso- 
ciations which  organized  in  form  of  law  and  carried  on  a  lawful, 
but  essentially  fraudulent  business  with  the  public,  for  a  season, 
and  then  disappeared  with  unfulfilled  obligations.  Those,  and 
similar  abuses,  inflicted  upon  the  public  under  shield  of  the  law, 
will  be  measurably  redressed  in  future,  by  the  recent  act  of  the 
legislature. 

"The  new  statute  is  likely  to  compel  the  speedy  departure  of 
several,  which  will  be  unable  to  meet  its  qualifications  and  have 
no  adequate  reason  for  their  existence,  and  others  will  ultimately 
yield  to  the  competition  of  more  potent  rivals.  And  thus  the 
system  must  abide  ultimate  judgment  upon  the  fate  of  a  few 
chosen  representatives.  The  demonstration  may  be  somewhat 
remote.  A  well  managed  association  ought  to  sustain  itself  for  a 
few  years  without  difficulty.  If  it  attempted  to  insure  lives  to  the 
age  only  of  fifty,  it  might  rationally  go  on  for  an  indefinite  term 
on  that  basis.  But  to  an  association  which  undertakes  to  insure 


148  TEtK   THREE   SYSTEMS 

persons  to  the  extreme  limit  of  human  life,  the  crisis  comes  when 
a  considerable  body  of  its  members  reach  old  age  and  the  death- 
rate  rapidly  increases,  as  must  be.  If  assessments  are  graded  to 
the  relative  prospect  of  longevity  of  members,  as  the  ages  ad- 
vance, will  the  old  man  stay  in  and  pay  the  greatly  augmented 
cost  of  insurance  ?  If,  as  probable,  not,  then  the  plan  fails  as 
whole-life  insurance.  Or,  if  assessments  are  not  graded,  will  the 
youth  stay  in  and  bear  his  disproportionate  burden  of  a  com- 
mon loss  for  the  benefit  of  the  more  aged  ?  The  assumption  of 
this  plan  is  that  new  lives  will  constantly  come  in  and  maintain 
the  average  age  and  a  uniform  death-rate,  in  which  case  the  asso- 
ciation may  last  and  perform  its  functions  while  those  relations 
are  kept.  Time  will  test  and  judge  its  merits  and  limitations. 
Meanwhile,  we  may  safely  assume  that  with  proper  administra- 
tion the  assessment  plan  may  furnish  a  cheap  and  good  temporary 
insurance  and  a  public  beneficence  ;  and  that  the  absolute  life 
insurance  afforded  by  the  level  premium  method,  is  not  possible 
to  the  assessment  plan  as  yet  formulated,  because  the  latter  de- 
pends on  conditions  of  the  future,  incapable  of  present  assur- 
ance. It  is  the  difference  between  a  naked  conditional  promise, 
and  an  absolute  promise  secured  by  sufficient  pledge  of  value. 
Both  plans  of  insurance  have  distinctive  merits,  and  in  behalf  of 
both,  pretensions  are  put  forth  not  entitled  to  respect." 

The  wisdom  of  a  majority  of  the  legislation  of  Massa- 
chusetts is  conceded,  and  it  was  thought  when  the  law  above 
referred  to  was  passed  that  the  assessment  system  was  suffi- 
ciently safeguarded.  But  before  fifteen  years  had  elapsed  the 
Massachusetts  legislature  passed  a  law  practically  eliminat- 
ing assessment  insurance  as  conducted  by  business  associa- 
tions, and  permitting  existing  institutions  to  transform  them- 
selves into  life  insurance  companies  on  the  level-premium 
plan.  It  is  a  noteworthy  fact  that  of  all  the  Massachusetts 
companies  living  at  the  time  of  the  passage  of  the  act  of 
1883,  not  one  was  in  existence  when  the  Dewey  law  was 
enacted  in  1899,  and  only  two  domestic  companies  took  ad- 
vantage of  it. 

The  Hon.  John  A.  McCall,  Jr.,  at  one  time  Superintendent 
of  the  Insurance  Department  of  the  State  of  New  York,  under 
the  head  of  ''Co-Operative  Business,"  in  his  official  report 
to  the  legislature  of  that  State,  for  the  year  ending  December 
31,  1884 — date  of  report,  February  19,  1885 — said: 

"The  management  of  the  Co-operative  organizations  gener- 
ally appears  to  be  intrusted  to  reliable  and  faithful  officials,  but 
the  difficulty  encountered  in  securing  members  without  the  inter- 
vention of  special  agents  is  apt  to  place  the  control  and  continu- 
ance of  the  association  within  the  power  of  the  intervenors.  In 
very  many  instances  it  has  been  found  that  the  allegiance  and 
loyalty  of  these  individuals  depend  upon  the  extension  of,  or  ad- 
ditions to,  their  jug-handle  contracts.  And  once  they  sever  their 
connection  with  an  association,  their  zeal  and  activity  in  pointing 
out  its  weak  spots  is  comparable  only  to  their  efforts  to  destroy 
its  existence,  by  a  transfer  of  the  members  to  the  agent's  latest 
attachment.  It  is  not  surprising  that  the  vehement  individuals 
that  prate  unceasingly  against  old  line  companies  should  be 
found  pursuing  the  most  objectionable  of  their  methods.  In  the 
prominent  cases  of  this  coming  within  the  censure  of  the  De- 


OF  LIFE  INSURANCE  149 

partment,  and  made  manifest  by  its  investigations,  the  names  of 
former  agents  of  defunct  life  insurance  companies  appear  con- 
spicuously. If  mentioned  they  would  be  recognized  as  the  in- 
ventors of  chimerical  plans,  and  the  stentorian  advocates  of  cor- 
porations whose  weakness  was  their  chief  feature.  It  is  not 
difficult,  then,  to  understand  that  mistrustfulness  and  doubt  are 
engendered  by  the  action  and  promises  of  such  employes,  or  that 
such  associations  will  have  but  a  short-lived  existence,  when  it  is 
realized  that  the  rights  of  their  members  are  subordinate  to  the 
privileges  and  powers  of  the  agents.  The  fair-minded  people 
who  are  honest  in  their  advocacy  of  this  plan  of  preservation, 
and  whose  efforts  are  directed  to  protect  themselves  by  reform 
within,  and  from  danger  without,  the  co  operative  institutions, 
are  fully  cognizant  of  the  troubles  that  threaten  to  destroy  the 
usefulness  of  all  the  associations.  To  them  the  superintendent  is 
confident  he  will  not  appeal  in  vain  for  assistance  in  the  correc- 
tion of  the  abuses  described.  The  officers  who  prosecute  their 
business  in  an  honest  way  need  have  no  fear  that  any  doubt  of 
the  superintendent  as  to  the  system  of  assessment  insurance  will 
be  allowed  to  destroy  or  impair  the  existence  of  any  legitimate 
organization.  The  law  will  be  carried  out  in  every  case,  without 
consideration  or  thought  of  the  great  influences  which  are  often 
referred  to  as  being  continually  at  work,  in  and  out  of  the  Legis- 
lature, for  and  against  co-operative  associations.  There  will  be 
no  hesitation  in  criticising  or  closing  up  the  affairs  of  any  mis- 
managed institution,  through  contemplation  of  the  effect  it  may 
have  on  the  remaining  associations;  neither  will  the  superintend 
ent  condemn  a  society  because  it  shows  evidence  of  success, 
thus  disproving  the  assertions  and  predictions  of  those  who  are 
paid  to  print  their  conclusions. 

"The  pretenses  and  promises  of  some  of  the  managers  would 
be  grotesque  if  they  were  not  put  forth  in  a  serious  way.  It  is 
not  doubted  that  if  the  promoters  of  some  of  the  advertised 
schemes  were  pecuniarily  responsible,  they  could  be  compelled, 
personally,  by  reason  of  their  false  representations  to  make  good 
their  wondrous  pledges.  That  the  danger  to  honest  assessment 
organizations  caused  by  the  practices  of  the  catch-penny  institu- 
tions is  realized,  will  be  seen  by  reference  to  the  report  of  the 
executive  committee  of  the  Mutual  Benefit  Life  Associations  of 
America,  made  at  the  ninth  annual  convention,  held  in  October 
last,  at  Cincinnati,  as  follows: 

"  'First.  The  expense  of  management  must  be  provided  for, 
in  the  main,  by  fixed  annual  dues. 

"  'Second.  The  mortality  rates  at  age  of  entry  must  be  graded 
according  to  one  of  the  combined  standard  mortality  tables. 

"  'Third.  If  the  mortality  rates  do  not  increase  with  age, 
after  entry,  the  rates  at  entry  must  be  loaded  twenty -five  per  cent., 
at  five  per  cent,  per  annum,  compound  interest,  and  such  loading 
with  interest  must  be  held  as  a  liability  or  reserve,  and  applied  to 
the  payment  of  the  respective  policies  when  they  become  claims, 
and  the  assessments  upon  surviving  members  correspondingly 
reduced. 

"'Fourth.  If  the  rates  increase  after  age  of  entry,  such  in- 
crease must  not  be  less  than  100  per  cent.,  or  double  the  original 
rate,  by  the  end  of  the  probability  of  life  expectancy  of  the 
insured. 

"  'Fifth.  If  any  sum  of  money  or  endowment  is  promised  to 
members  during  life,  such  sum  must  be  provided  for  by  collecting 
monthly,  quarterly,  semi-annual,  or  annual  payments,  in  excess 
of  the  cost  of  mortality,  that  will,  at  four  and  a-half  per  cent. 


150  THE   THREE   SYSTEMS 

per  annum  during  the  endowment  period,  amount  to  the  sum 
promised. 

"  'Sixth.  If  a  uniform  rate  for  all  ages  is  charged,  the  benefit 
to  be  paid  must  be  graded  according  to  the  life  expectation, 
and  when  graded  according  to  life  expectation  from  age  of 
entry,  the  rate  of  assessment  must  be  loaded  at  least  twenty  five 
percent.,  at  the  rate  of  five  per  cent,  per  annum,  and  reserved 
and  used  in  part  payment  of  death  claims  in  order  to  offset  the 
increasing  liability  arising  from  the  advancing  age  of  members. 

"  'Seventh.  All  the  modern  precautions  in  selection  must  be 
rigidly  enforced,  and  no  members  admitted  over  the  age  of  sixty.' 
"The  recommendations  of  the  committee  are  quite  commend- 
able, and  they  are  quoted  here  as  the  judgment  of  intelligent  offi- 
cials, who  by  experience  are  entitled  and  competent  to  point  out 
the  apparent  dangers  to  the  system,  and  suggest  the  needed 
remedies. 

"  The  superintendent  does  not  desire  to  be  understood  as 
favoring  or  endorsing  all  of  the  above  recommendations,  and  in 
particular  he  objects  to  to  the  one  referring  to  endowment  pay- 
ments, to  which  payments,  on  any  assessment  plan,  he  is  op- 
posed, as  being  futile  and  in  contradiction  of  the  theory  of  co- 
operative insurance.  In  the  main,  however,  the  report  of  the 
committee  is  exceedingly  conservative,  and  will  tend  to  protect 
the  associations  and  their  members  from  the  evils  connected  with 
the  sham  concerns  that  'have  no  hope  of  existence  unless  they, 
so  to  speak,  undersell  the  honest  ones,  by  promising  larger  bene- 
fits for  the  same  money  or  similar  benefits  for  less  money/" 

"In  the  line  of  reform,  also,  is  the  action  taken  during  this 
year,  by  the  Illinois  Mason's  Benevolent  Society,  an  institution 
that  has  paid  in  fourteen  years  about  $2,500,000  to  the  benefici- 
aries of  its  members.  It  was  apparent  from  the  experience  of 
the  society,  that  while  abundantly  able  to  care  for  its  present 
claims,  it  was  evident  it  had  outlived  the  scheme  upon  which  it 
was  founded,  and  its  survival  depended  entirely  upon  a  change 
of  its  plan,  so  that  assessments  would  be  regulated  by  the  in- 
creasing age  of  the  member,  instead  of  a  uniform  contribution 
without  regard  to  age.  This  recognition  of  the  only  method 
that  can  give  permanency  to  the  co-operative  plan  of  life  insur- 
ance, is  deserving  of  emulation  by  the  organizations  that  are 
operating  on  the  fallacious  principle  that  served  to  lull  the 
Western  organization  into  a  fancied  security,  until  *  the  society 
languishes,  and  while  the  older  men  remain  with  it,  without  'di- 
minished risks,  the  young  fail  to  be  attracted  in  numbers  sufficient 
to  reduce  the  average  age . ' " 

Assessment  organizations  claiming  New  York  as  their 
home  State,  were  very  numerous  when  the  foregoing  was 
penned  by  John  A.  McCall  in  the  early  days  of  1885.  and 
a  large  number  were  organized  in  the  years  immediately 
following.  In  1889  a  law  was  passed  modeled  somewhat  on 
the  lines  of  the  Massachusetts  law,  and  requiring  the  possess- 
sion  of  at  least  $8,000  before  business  could  be  begun,  as  a 
result  of  which  scarcely  a  half-dozen  companies  have  since 
started,  while  on  the  other  hand  every  year  has  seen  a  number 
disappear  until  now  there  are  not  a  dozen  organizations  left 
of  any  prominence. 


OF   LIFE   INSURANCE.  151 

The  Hon.  Ephraim  Williams,  formerly  Insurance  Commis- 
sioner for  the  State  of  Connecticut,  in  his  official  report  to 
the  legislature  for  the  year  ending  December  31,  1884 — report 
dated  April  10,  1885 — said: 

"All  properly  conducted  assessment  companies  fix  their 
yearly  assessments  strictly  according  to  the  respective  ages  of 
the  members  and  the  year's  risk  at  those  ages.  All  grouping  of 
different  ages  for  a  like  assessment  is  inequitable,  and  therefore 
objectionable.  For  the  younger  ages  in  the  group  pay  not  only 
for  themselves,  but  also  in  part  for  the  older  ages.  It  matters 
not  whether  the  assessment  be  large  enough  to  cover  the  risk  of 
the  eldest  age  in  the  group  or  only  sufficient  to  cover  the  aver- 
age age;  in  either  case  the  younger  are  overcharged." 

In  the  year  1900  the  Connecticut  report  appeared  without 
the  record  of  a  single  assessment  company,  except  the 
gloomy  record  of  the  receivers. 

The  foregoing  official  utterances  of  the  Insurance  Commis- 
sioner of  Massachusetts,  and  of  the  Superintendents  of  Insur- 
ance for  the  States  of  New  York  and  Connecticut,  are  worthy  of 
careful  consideration.  More  attention  has  been  given  to  life 
insurance  in  all  its  different  phases,  and  more  money  expended 
in  its  supervision,  in  these  three  States  than  in  all  the  other 
States  of  the  Union. 

Fraternal  Orders. — These  orders,  which  now  number 
well  up  in  the  hundreds,  had  their  origin  in  1868  with  the 
establishment  of  the  Ancient  Order  United  Workmen.  This 
order  started  out  by  collecting  one  dollar  per  member  for 
each  death,  and  soon  proved  an  apparent  success.  So  rapid 
was  its  progress  that  a  host  of  imitators  speedily  came  into 
the  field,  all  offering  insurance  at  cost.  As  the  years  rolled 
on  and  the  average  age  of  the  membership  increased  in  spite 
of  the  constant  accession  of  new  blood,  the  death  losses  in 
many  orders  rose  to  an  alarming  figure  and  disintegration 
set  in.  Some  have  failed  and  a  number,  among  which  are 
included  several  large  orders,  are  in  dire  straits  with  nothing 
short  of  bankruptcy  before  them. 

The  plan  or  system  upon  which  these  orders  worked  for 
many  years  was  the  flat  assessment  principle.  No  funds  were 
accumulated  to  keep  down  the  advancing  mortuary  cost,  but 
when  money  was  required  to  pay  death  claims,  an  assessment 
was  levied.  If  the  assessment  produced  more  than  the  un- 
paid claims,  the  balance  was  retained  to  pay  other  claims  as 
they  accrued.  Then  when  the  death  benefit  fund  was  again 
depleted,  another  assessment  was  levied.  Of  late  years  efforts 
have  been  made  by  many  orders  to  provide  some  sort  of  accu- 
mulation so  as  to  prevent  assessments  being  levied  too  fre- 
quently, or  in  too  large  amounts,  but  no  scientific  plan  has 
been  devised  or  adopted  by  any,  nor  are  the  orders  in  accord 


152 


THE  THREE   SYSTEMS 


as  to  any  particular  plan.  Nearly  every  order  has  a  method 
of  its  own,  and  as  none  are  on  scientific  principles  ultimate 
failure  is  still  as  certain  as  before. 

The  value  of  co-operation  has  been  recognized  by  some 
orders  and  a  national  body  formed  which  meets  annually  to 
consider  the  problems  of  the  business.  But  the  difficulty  of 
agreement  upon  a  scientific  subject  between  men  unfamiliar 
with  the  principles  of  life  insurance  is  manifest  at  all  such 
meetings.  A  majority  of  the  older  orders  have  no  reserve 
provision,  while  many  of  those  organized  within  the  past  ten 
years  have  provided  for  some  form  of  reserve.  Accordingly 
there  is  a  cleavage  along  the  line  of  reserves  and  no  reserves, 
the  former  disclaiming  any  connection  with  the  latter. 

It  must  be  conceded,  however,  that  the  experience  of  the 
fraternals  affords  abundant  scope  for  investigation  and  sup- 
plies data  of  an  invaluable  character  in  connection  with  mor- 
tality statistics.  Orders  comprising  the  National  Fraternal 
Congress  a  few  years  since  contributed  their  mortality  ex- 
perience from  which  a  mortality  table  has  been  compiled,  and 
various  tables  of  premiums  for  the  whole  of  life  calculated 
which  are  recommended  for  use  by  fraternal  orders  as  mini- 
mum rates.  The  mortality  table  and  life  expectancy  deduced 
therefrom  is  herewith  given: 


Fraternal  Congress  Mortality  Table 


Ag  - 

.No. 
Living. 

No. 
Dying. 

Probability 
of  Dying. 

Age. 

No. 
Living. 

No. 
Dying. 

Probability 
of  Dying. 

20 

100,000 

500 

.0050000 

40 

89,251 

640 

.0071708 

21 

99,500 

501 

.0050352 

41 

88,611 

660 

.0074483 

22 

98,999 

502 

.0050708 

42 

87,951 

683 

.0077657 

23 

98,497 

503 

.0051068 

43 

87,268 

708 

.0081129 

24 

97,994 

505 

.0051535 

44 

86,560 

734 

.0084797 

25 

97,489 

507 

.0052006 

45 

85,826 

761 

.0088668 

26 

96,982 

510 

.0052587 

46 

85,065 

790 

.0092870 

27 

96,472 

513 

.0053176 

47 

84,275 

822 

.0097538 

28 

95,959 

517 

.0053877 

48 

83,453 

857 

.0102693 

29 

95,442 

522 

.0054693 

49 

82,596 

894 

.0108238 

30 

94,920 

527 

.  00555  VO 

50 

81,702 

935 

.0114440 

31 

94,393 

533 

.0056466 

51 

80767 

981 

.0121460 

32 

93,860 

540 

.0057532 

52 

79,786 

1,029 

.0128970 

33 

93,320 

548 

.0058723 

53 

78,757 

1,083 

.0137512 

34 

92,772 

557 

.0060040 

54 

77,674 

1,140 

.0146767 

35 

92,215 

567 

.0061487 

55 

76,534 

1,202 

.0157054 

36 

91,648 

578 

.0063067 

56 

75,332 

1,270 

.0168587 

37 

91,070 

591 

.0064895 

57 

74,062 

1,342 

.0181200 

38 

90,479 

606 

.0066977 

58 

72,720 

1,418 

.0194994 

39 

89,873 

622 

.0069209 

59 

71,302 

1,501 

.0210513 

OF   LIFE   INSURANCE.  153 

FRATERNAL  CONGRESS  MORTALITY  TABLE — Continued. 


Age. 

No. 
Living. 

No. 
Dying. 

Probability 
of  Dying. 

Age. 

No. 
Living. 

No. 
Dying. 

Probability 
of  Dying. 

60 

69,801 

1,588 

.0227504 

80 

20,270 

2,799 

.1380858 

61 

68,213 

1,681 

.0246434 

81 

17,471 

2,659 

.1521951 

62 

66,532 

1,778 

.0267240 

82 

14,812 

2,485 

.1677694 

63 

64,754 

1,880 

.0290330 

83 

12,327 

2,280 

.1849599 

64 

62,874 

1,985 

.0315711 

84 

10,047 

2,050 

.2040410 

65 

60,889 

2,094 

.0343904 

85 

7,997 

1,800 

.2250844 

t)6 

58,795 

2,206 

.0375202 

86 

6,197 

1,539 

.2483460 

67 

*6,589 

2,318 

.0409620 

87 

4.658 

1,277 

.2741520 

68 

54,271 

2,430 

.0447753 

88 

3,381 

1,023 

.3025732 

69 

51,841 

2,539 

.0489767 

89 

2,358 

788 

.3341815 

70 

49,302 

2,645 

.0536489 

90 

1,570 

579 

.3687898 

71 

46.657 

2,744 

.0588122 

91 

991 

404 

.4075690 

72 

43,913 

2,832 

.0644912 

92 

587 

264 

.4497445 

73 

41,081 

2,909 

.0708113 

93 

323 

161 

.4984520 

74 

38,172 

2,969 

.0777795 

94 

162 

89 

.5493827 

75 

35,203 

3,009 

.0854757 

95 

73 

44 

.6027397 

76 

32,194 

3,026 

.0939927 

96 

29 

19 

.6551724 

77 

29,168 

3,016 

.1034010 

97 

10 

7 

.7000000 

78 

26,152 

2,977 

.1138345 

98 

3 

3 

1.0000000 

79 

23,175 

2,905 

.1253506 

i 

Life  Expectancy. 


Age. 

Years. 

Age. 

Years. 

Age. 

Years. 

Age. 

Years. 

Age. 

Years. 

20 

45.6 

36 

33.1 

52 

20.7 

68 

10.1 

84 

3.3 

21 

44.9 

37 

32.3 

53 

19.9 

69 

9.5 

85 

3.0 

22 

44.1 

38 

31.5 

54 

19.2 

70 

9.0 

86 

2.8 

23 

43.3 

39 

30.7 

55 

18.5 

71 

8.5 

1    87 

2.5 

24 

42.5 

40 

29.9 

56 

17.8 

72 

8.0 

1    88 

2.3 

25 

41.8 

41 

29.1 

57 

17.1 

73 

7.5 

89 

2.1 

26 

41.0 

42 

28.3 

58 

16.4 

74 

7.0 

90 

1.9 

27 

40.2 

43 

27.5 

59 

15.7 

75 

6.6 

91 

1.7 

2ri 

39.4 

44 

26.8 

60 

15.0 

76 

6.2 

92 

1.5 

29 

38.6 

45 

26.0 

61 

14.4 

77 

5.7 

93 

1.4 

30 

37.8 

46 

25.2 

62 

13.7 

78 

5.3 

94 

1.2 

31 

370 

47 

24.4 

63 

13.1 

79 

5.0 

95 

1.1 

32 

36.2 

48 

23.7 

64 

12.4 

80 

4.6 

96 

1.0 

33 

35.4 

49 

22.9 

65 

11.8 

81 

4.3 

97 

0.8 

34 

34.6 

50 

22.2 

66 

11.2 

82 

3.9 

98 

0.5 

35 

33  9 

51 

21.4 

67 

10.7 

83 

3.6 

The  following  table  shows,  first,  the  natural  premiums 
which  should  be  collected  to  provide  for  the  annual  cost,  and 
second,  the  net  annual  level  premiums  from  age  at  entry,  per 
$1,000  of  insurance,  based  on  the  foregoing  table.  The  level 


154 


THE   THREE    SYSTEMS 


rates  are  on  a  four  per  cent,  interest  basis,  and  involve  the 
maintenance  of  a  reserve: 


Net 
Annual 

Net 
Annual 

Natural 

Level 

Natural 

Level 

Natural 

Age. 

Premium. 

Rate. 

Age. 

Premium. 

Rate. 

Age. 

Premium. 

20 

$5.00 

47 

$9.80 

$26.97 

73 

$70.80 

21 

5.00 

$10.62 

48 

10.30 

28.20 

74 

77.80 

22 

5.10 

10.92 

49 

10.80 

29.51 

75 

85.50 

23 

5.10 

11.24 

50 

11.40 

30.91 

76 

94.00 

24 

5.20 

11.57 

51 

12.10 

32.39 

77 

103.40 

25 

5.20 

11.92 

52 

12.90 

33.97 

78 

113.80 

26 

5.30 

12.28 

53 

13.70 

35.65 

79 

125.40 

27 

5.30 

12.67 

54 

14.70 

37.45 

80 

138.50 

28 

5.40 

13.08 

55 

15.70 

39.36 

81 

152.20 

29 

5.50 

13.51 

56 

16.90 

41.41 

82 

167.80 

30 

5.50 

13.96 

57 

18.10 

43.60 

83 

185.00 

31 

5.60 

14.43 

58 

19.50 

45.94 

84 

204.00 

32 

5.80 

14.94 

59 

21.10 

48.45 

85 

225.10 

33 

5  90 

1547 

60 

22.80 

51.13 

86 

248.30 

34 

6.00 

16.03 

61 

24.60 

64.01 

87 

274.20 

35 

6.10 

16.62 

62 

26.70 

88 

302.60 

36 

6.30 

17.24 

63 

2y.oo 

89 

334.20 

37 

6.50 

17.90 

64 

31.60 

90 

368.80 

38 

6.70 

18.60 

65 

34.40 

.... 

91 

407.70 

39 

6.90 

19.34 

66 

37.50 

•  ... 

92 

449.70 

40 

7.20 

20.11 

67 

41.00 

.... 

93 

498.50 

41 

7.40 

20.93 

68 

44.80 

94 

549.40 

42 

7.80 

21.80 

69 

49.00 

95 

602.70 

34 

8.10 

22.72 

70 

53.60 

96 

655.00 

44 

8.50 

23.69 

71 

58.80 

.... 

97- 

700.00 

45 

8.90 

24.72 

72 

6450 

98 

1,000.00 

46 

9.30 

25.81 

The  recommendation  of  the  committee  having  charge  of 
the  mortality  investigation  above  referred  to  was  to  the  effect 
that  the  net  rates  submitted  should  be  adopted  as  a  mini- 
mum. In  other  words,  the  experience  showed  that  fraternal 
orders  could  not  safely  do  business  if  they  levied  and  col- 
lected assessments  amounting  to  less  than  the  annual  cost 
shown  in  the  natural  premium  column,  increasing  the  assess- 
ments each  year  in  accordance  with  the  age  of  the  members. 
Any  fraternal  desiring  to  keep  the  premium  level,  as  of  age 
at  entry,  should  adopt  the  net  annual  level  rate.  Some  orders 
provide  for  a  step-rate,  under  which  all  persons  between 
certain  ages  pay  the  same  rate  until  they  pass  into  the  next 
five-year-age  group.  For  those  orders  the  following  mini- 
mum schedule  was  recommended,  based  on-  the  natural  pre- 
mium: 


OF   LIFE   INSURANCE.  155 

Net  Annual  Net  Annual 

Rate  Rate 

Ages.  Per  $1000.  Ages.  Per  $1000. 

21-25  |5.11  46-50  $10.25 

26-30  5.40  51-55  13.82 

31-35  5.93  56-60  19.60 

36-40  6.71  61  54.01 

41-45  8.14 

At  age  sixty-one  the  committee  recommended  that  those 
still  desiring  to  keep  up  their  insurance  should  be  raised  to 
the  level  rate,  which,  of  course,  remains  unchanged  for  the 
balance  of  life. 

The  future  of  the  fraternal  orders  in  this  country  is  a 
matter  of  considerable  interest  to  millions  of  people.  That 
they  cannot  continue  along  their  present  lines  is  certain,  and 
as  all  investigations  undertaken  by  them  lead  to  the  same 
conclusion,  that  only  a  level  premium  and  an  increasing  re- 
serve fund  for  every  year  of  the  policy  can  save  them,  it  is 
to  be  hoped  that  they  will  profit  by  the  lesson  and  put  their 
business  on  the  only  sure  and  firm  foundation. 


156 


THE   THREE    SYSTEMS 


CHAPTER   XV. 


INTEREST. — INTEREST  LAWS  OF  THE  STATES.— EXPLANATION  OF 
THE  TABLES.— TABLES. 

INTEREST. 

Interest,  in  the  sense  of  recompense  for  money  lent,  origina- 
ted very  early  in  the  world's  history.  There  are  frequent  allu- 
sions to  it  in  the  Scripture,  under  the  title  of  "usury,"  which 
was  the  old  English  word  for  interest. 

Robertson  tells  us  that  the  fixed  rate  of  interest  in  the  12th 
century  was  twenty  per  cent.  In  1560  it  was  fixed  in  Spain,  Ger- 
many, and  Flanders,  by  the  emperor,  Charles  V.,  at  twelve  per 
cent.  Not  until  the  15th  century  were  Christians  allowed  to  re- 
ceive interest  on  money.  Jews  were  the  only  usurers.  The  low- 
est rate  of  interest  in  Athens  was  ten  per  cent,  per  annum,  and 
the  highest  thirty-six  per  cent.  In  Rome  similarly  exorbitant 
rates  were  exacted.  About  the  year  B.  C.  346,  the  rate  was  limi- 
ted to  five  per  cent. ;  and  five  years  later,  the  practice  of  taking 
interest  for  money  was  forbidden,  altogether,  and  he  who  re- 
ceived more  than  he  advanced  was  rendered  liable  to  four-fold 
restitution.  The  earliest  enactment  upon  the  subject  mentioned 
in  English  history,  was  A.  D.  1197,  forbidding  Christians  to  take 
interest  for  money.  In  15.46,  in  the  37th  year  of  the  reign  of 
Henry  VIII.,  an  Act  was  passed  limiting  the  legal  rate  of  inter- 
est, in  England,  to  ten  per  cent,  per  annum,  but  it  was  repealed. 
May  1st.,  1552.  This  last  Act  was  entitled  "A  Bill  against 
Usurie."  and  re-enacted  the  prohibitions  contained  in  previous 
Acts,  with  similar  penalties.  The  Act  of  1552,  was  in  force  un- 
til 1571,  when  the  legal  rate  was  fixed  at  ten  per  cent.  This  con- 
tinued until  1624,  when  the  rate  was  reduced  to  eight  per  cent., 
and  the  word  "  interest"  was  first  used  instead  of  usury;  it  was 
afterwards  reduced  to  six  per  cent.,  and,  in  1714  to  five  per  cent., 
remaining  so,  with  one  or  two  exceptions,  for  a  few  years,  when 
it  was  suspended  and  still  remains  so. 

Most  other  countries  have,  at  some  period  of  their  history, 
found  it  necessary  to  limit  the  rate  of  interest.  In  1228  the  rate 
was  fixed,  at  Verona,  at  twelve  and  one-half  per  cent.,  per  annum. 
In  1242,  James  I. ,  King  of  Aragon,  fixed  it  at  eighteen  per  cent. 


6F  LIFE   INSURANCE. 


157 


In  1270  the  legal  rate  at  Modena  was  twenty  per  cent.  There  is 
an  edict  of  Phillip  Augustus,  near  this  period  (1272),  limiting  the 
Jews,  in  France,  to  forty-eight  per  cent  !  In  1311  Phillip  IV. 
fixed  the  interest  that  might  be  legally  exacted  in  the  fairs  of 
Champagne  at  twenty  per  cent.  In  1336  the  Republic  of  Florence 
borrowed  money  of  individuals  upon  an  assignment  of  taxes  at 
fifteen  per  cent.  In  1490,  at  Piacenza,  the  rate  was  as  high  as 
forty -per  cent.  In  1491,  the  first  public  sanction,  by  the  Popes, 
to  the  payment  of  interest,  was  given  !  The  pi  ice  of  the  Public 
Funds  is  perhaps  the  best  criterion  in  any  country,  and  has  been 
taken  as  such  by  the  most  experienced  writers  on  the  subject. 
The  Public  Funds  indicate  the  abundance  or  scarcity  of  money; 
are  affected  by  war  and  peace,  and  by  national  prosperity  or  ad- 
versity. They  may  therefore  be  termed  the  national  thermome- 
ter. As  the  price  of  the  Public  Funds  goes  down,  the  rate  of  in- 
terest rushes  up.  War  and  scarcity  operate  in  this  direction, 
and  afford  us  another  remarkable  instance  of  the  operation  of  the 
law  of  compensation.  War  and  famine  accelerate  the  rate  of 
mortality,  but  they  also  improve  the  rate  of  interest,  so  it  is 
probable  that  Assurance  Offices  with  large  accumulation  of  funds, 
realize,  under  such  conditions,  as  much  by  excess  of  interest  on 
their  investments  as  they  lose  by  the  excess  of  mortality. 

The  relative  effects  of  simple  and  compound  interest  may  be 
seen  in  the  following  : 

TABLE  No.  2. 


Rate  per  cent,  per 
annum. 

At  simple  interest  it  will 
double. 

At  compound  interest  it  will 
double. 

2 

In  50      years 

In  35      years 

2/1* 

40 

28 

3 

33^ 

23% 

8% 

28% 

203^i 

4 

25 

1% 

5  * 

20  4 

14}f 

6 

16% 

12 

7 

14M 

10M 

8 

12% 

9 

9 

9 

8 

10 

10 

?X 

Mr.  Francis  Bailey  calculated,  up  to  the  year,  1810,  that,  if 
one  penny  had  been  put  out  at  five  per  cent.,  compound  interest, 
at  the  birth  of  Christ,  it  would  have  amounted  to  more  money 
than  could  be  expressed  by  357  millions  of  Globes,  each  equal  to 
the  earth  in  magnitude,  all  of  solid  gold  of  standard  quality, 
worth,  at  the  mint  price,  three  pounds,  seventeen  shillings  and  a 
half  penny,  per  ounce  ;  whereas,  if  the  penny  had  been  put  out 


158  THE  THREE   SYSTEMS 

at  the  same  rate,  at  simple  interest,  the  amount  in  the  same  time 
would  have  been  only  seven  shillings  and  seven  pence  half 
penny!!  Mr.  Hillman  extended  the  calculation  up  to  the  end 
of  the  year,  1846,  giving  as  the  result,  two  thousand  one  hundred 
and  seven  millions,  five  hundred  and  thirty  thousand,  eight  hun- 
dred and  sixty-four  worlds  of  solid  gold  !  Supposing  the  diame- 
ter of  the  world  to  be  8,000  miles,  these  globes,  placed  in  a 
straight  line,  would  reach  into  space  sixteen  billions,  eight  hun- 
dred and  sixty  thousand  two  hundred  and  forty-six  millions,  nine 
hundred  and  twelve  thousand  miles,  quantities  too  large  for 
human  comprehension.  (O.  Walford— 1867.) 

The  practical  advantage  in  saving  and  compounding, 
even  small  sums  of  money,  for  a  term  of  years,  is  shown  by  the 
following  : 

EVERY  MAN,  AT  AGE  50,  who  has  saved  $1.25,  per  day  since 
he  was  21  years  old,  and  compounded  it,  annually,  at  4  per 
cent.,  is  worth  $25,000  !  88  cents  per  day  at  6  per  cent. 

EVERY  MAN,  AT  AGE  55,  who  has  saved  $1.51  per  day,  since 
he  was  21  years  old,  and  compounded  it,  annually,  at  4  per 
cent.,  is  worth  $40,000  !  Only  $1.00  per  day,  at  6  per  cent : 

EVERY  MAN,  AT  AGE  60,  who  has  saved  $1.75,  per  day,  since 
he  was  21  years  old,  and  compounded  it,  annually,  at  4  per  cent., 
is  worth  $60,000  !  ! 


!  CF  LIFE   INSURANCE. 

TABLE  NO.    3. 
INTEREST  LAWS  OP  THE  STATES. 


159 


State. 

Bate  per 
cent. 

Penalty  of  Usury. 

i 

JS 

By  Special 
Contract. 

Alabama  
Arizona 

8 

7 
6 
7 
8 

6 

6 

6 
8 

7 

7 

5 

6 
6 

6 
6 
6 
5 
6 
6 
6 
6 
7 
6 
6 
10 
7 
7 

6 
6 
6 

6 

6 

7 
6 

8 
No  limit 
10 
No  limit 
No  limit 

6 
6 

10 
10 
8 
12 

7 

10 

8 

8 
10 
6 
8 
No  limit 
6 
No  limit 
8 
10 
10 
8 
No  limit 
10 
No  limit 

6 
6 
12 

6 

6 
12 

8 

Loss  of  interest 
None 
Forfeiture  of  principal  and  interest 
None 
None.  (8  per  cent  allowed  on  town 
and  county  bonds.  ) 
None 
Double  amount  of  loan 

Forfeiture  of  all  interest 
Forfeiture  of  all  interest 
Forfeiture  of  excess  of  lawful  rate 
Loss  of  interest  by  tender;  10  per 
cent  from  borrower  for  school 
fund 
Forfeiture  of  all  interest 

Forfeiture  of  interest  . 
Forfeiture  of  interest  over  6  per 
cent 
Forfeiture  of  interest  and  costs 
Forfeiture  of  excess  of  interest 

Forfeiture  of  interest 
None 
Forfeiture  of  excess  of  interest 
None 
Forfeiture  of  interest 
Forfeiture  of  principal 
Forfeiture  of  interest 
Forfeiture  of  all  interest 
None 
Forfeiture  of  all  interest  and  costs 
None 
Forfeiture  3  times   excess  of  in- 
terest 
Forfeiture  of  all  interest  and  costs 
Forfeiture  twice  amount  and  {100 
fine 
Forfeiture  of  contract  ;  punishable 
as  misdemeanor 
Forfeiture  of  twice  amount  paid 
Forfeiture  of  entire  interest 
Forfeiture  of  excess  of  interest 

Arkansas  
California  
Colorado  .... 

Connecticut  .  . 
Delaware  .... 
Dist.   9f    Col- 
umbia ...... 
Florida.     .    . 

Georgia  .... 

Idaho  

Illinois  
Indian    Terri- 
tory .. 

Indiana 

Iowa 

Kansas  .  . 

Kentucky  
Louisiana  
Maine  • 

Maryland  .... 
Massachusetts 
Michigan  
Minnesota  — 
Mississippi  .  .  . 
Missouri  
Montana. 

Nebraska  .... 
Nevada  
New     Hamp- 
shire   
New  Jersey.  .  . 
New  Mexico.  . 

New  York  

NorthCarolina 
North  Dakota. 
Ohio  

160 


THE    THREE    SYSTEMS 

INTEREST  LAWS.— Continued. 


State. 

Bate  per 
cent. 

Penalty  of  Usury. 

1 
JS 

Py  Special 
Contract. 

Oklahoma..  .  . 
Oregon  

7 
8 
6 
6 
7 
7 
6 
6 
8 
6 
6 
7 

6 
6 

8 

12 
10 
6 
No  limit 
8 
12 
6 
10 
No  limit 
6 
6 
12 

6 
10 
12 

Forfeiture  of  interest 
Forfeiture  of  interest  and  principal 
Forfeiture  of  excess  interest 
None 
Forfeiture  of  double  the  excess 
Forfeiture  of  all  interest 
Forfeiture  excess  interest 
Forfeiture  of  all  interest 
None 
Forfeiture  of  interest 
Forfeiture  of  interest 
Forfeiture  from  principal  of  double- 
illegal  interest 
Forfeiture  of  excess  interest 
Forfeiture  of  all  the  interest 
Interest  and  costs 

Pennsylvania. 
Rhode  Island. 
SouthCarolina 
South  Dakota 
Tennessee.  .  .  . 
Texas  ... 

Utah  

Vermont  
Virginia  
Washington... 

West  Virginia. 
Wisconsin  .... 
Wyoming  .... 

EXPLANATION   OF  THE  TABLES. 

Table  No.  1.— Col.  (1)  is  made  up  as  follows :  The  legal 
reserve,  for  instance,  Actuaries'  4%  on  $1,000  of  insurance,  Or- 
dinary Life  Plan,  issued  at  age  10,  is  $4.115  at  the  end  of  the 
first  policy  year.  The  present  value  of  $4.115,  for  one  year,  4 
percent,  interest,  is  $3.96,  and,  therefore,  tnis  $3.96  at  interest 
for  one  year — until  end  of  first  .policy  year — exactly  equals  the 
legal  reserve  at  end  of  year.  The  $3.96  is  the  "Reserve  Ele- 
ment" or  germ,  that  produces  the  legal  reserve,  end  of  year.  It 
is  not  the  legal  reserve  at  the  beginning  of  the  year — that  is  the 
net  premium,  or  $10.43— but  it  is  the  "Reserve  Element,"  as  we 
call  it.  In  a  similar  manner  all  the  reserve  elements  at  the  differ- 
ent ages,  from  10  to  99,  inclusive,  going  to  make  up  Col.  (1),  are 
produced. 

Col.  (2)  is  made  up  as  follows:  Confining  ourselves  to  amount 
and  kind  of  insurance,  as  above,  and  the  age  of  entry,  the  net 
annual  premium,  as  stated  above,  is  $10.43.  This  is  composed  of 
the  reserve  element  and  the  mortality  element.  The  reserve  ele- 
ment is  $3.96,  and,  taking  it  from  the  net  annual  premium, 
$10.43,  leaves  $6.47,  which  is  the  mortality  element.  The  other 


OF    LIFE    INSURANCE.  161 

mortality  elements  are  found  in  a  similar  manner,  and  all  of  them 
from  age  10  to  age  99,  constitute  Col.  (2). 

Col.  (3)  is  found  by  adding  Col.  (1)  to  Col.  (2),  which,  at  age 
10,  gives  $10.43,  and  taking  one-third  of  it,  $3.48,  we  have  the 
expense  element.  Similarly  with  reference  to  all  the  other  ages. 

Col.  (4)  is  columns  (1),  (2),  and  (3)  added  together.  At  age  10, 
it  is  $3.96-{-$6.47+$3.48,  equals  $13.91;  and  similarly  with  refer- 
ence to  all  the  ages  from  10  to  99,  inclusive.  These  three  columns 
constitute  the  elements  of  the  gross  level  premiums,  the  first  year, 
for  $1,000  of  ordinary  life  insurance,  at  the  ages  named,  when 
they  are  based  on  the  Actuaries'  Table  of  Mortality  and  4  per 
cent,  interest.  The  elements  of  other  kinds  of  premiums — 
Limited-payment  Life,  Endowment,  etc.,  etc. — may  be  ascer- 
tained in  a  similar  manner  by  using  the  reserve  end  first  policy 
year,  net  premium,  etc.,  etc.,  applicable  to  these  several  kinds  of 
insurance. 

Table  No.  1J£.—  Col.  (1)  is  identical  with  Col.  (6),  Table 
No.  16,  and  is  ascertained  by  mathematical  calculations.  Col  (2) 
is  one-third  of  Col.  (1).  Col.  (3)  is  columns  (1)  and  (2)  added  to- 
gether. It  is  the  net  natural  premium  loaded  thirty-three  and 
one-third  per  cent. 

Table  No.  2.— No  explanation  required. 
Table  No.  3. — No  explanation  required. 

Table  No.  4. — Required  the  amount  of  $1.00  per  annum,  at 
3  per  cent.,  simple  interest,  for  five  years.  One  dollar  is  on  in- 
terest for  five  years;  one  for  four;  one  for  three;  one  for  two, 
and  one  for  one  year.  The  interest  on  the  first  dollar  invested  is 
three  cents  per  year  for  five  years,  amounting  to  15  cents.  The 
interest  on  the  second  dollar  invested  is  3  cents  per  year  for  4 
years,  amounting  to  12  cents.  The  interest  on  the  third  dollar 
amounts  to  9  cents;  on  the  fourth  dollar,  6  cents;  and  on  the  fifth 
dollar,  3  cents.  These  different  sums — 15  cents,  12  cents,  9  cents, 
6  cents  and  3  cents — added  together  amount  to  45  cents,  which 
added  to  the  principle — $5.00 — ^ives  $5.45.  The  same  result 
would  be  ascertained  in  Col.  (1)  at  the  right  hand  of  (5)  in  the 
year  column,  at  a  glance;  and  similarly  with  reference  to  any 
other  rate  of  interest,  for  any  time,  named  in  the  table.  To  as- 
certain the  amount  of  $100,  $500,  or  any  other  sum,  first  find  the 
amount  of  $1.00  by  the  table,  and  then  multiply  this  by  the  num- 
ber of  dollars. 

Table  No.  5. —  What  will  $1.00  amount  to t  compounded,  an- 
nually, at  6  per  cent,  interest,  in  30  years?  By  looking  at  Col.  (6), 
in  the  table  opposite  (30)  in  the  year  column,  we  find  $5.74,  the 
answer.  For  40  years,  it  amounts  to  $10.29,  and  so  on.  For 
other  rates,  times  and  amounts,  first  ascertain  the  amount  of 


162  THE    THREE    SYSTEMS 

$1.00  by  the  table,  and  then  multiply  this  result  by  the  number 
of  dollars. 

Table  No.  6.  —  What  will  $1.00  per  annum  amount  to,  com- 
pounded^ annually,  at  6  per  cent,  interest,  in  30  years?  In  Col.  (6) 
of  the  Table  opposite  (30)  in  the  year  column,  we  find  $83.80 
the  answer;  $40  per  annum  thus  compounded  would  amount  to 
40  times  $83.80,  or  $3,352,  and  similarly  with  reference  to  other 
amounts,  at  other  rates  of  interest  for  a  longer  or  shorter  time. 

Table  No.  7. — How  much  will  $1.00  per  annum,  for  10 
years,  compounded,  annually,  at  5  per  cent,  interest,  amount  to  in 
40  years?  In  Col.  (5),  opposite  (40)  in  the  year  column,  we  find 
$57.08  the  answer.  $80  per  annum  thus  invested  would  amount 
to  eighty  times  $57.08,  or,  $4,566.40,  and  similarly  with  reference 
to  other  amounts  and  rates  for  a  longer  or  shorter  time.  The  an- 
nual investment  in  this  table,  whatever  it  may  be,  terminates  at 
the  end  of  the  first  ten  years;  but  the  compounding  continues 
until  the  end  of  the  time  designated. 

Table  No.  8. — How  much  will  $1.00  per  annum  for  15 
years,  compounded  annually,  at  4  per  cent,  interest,  amount  to  in 
30  years?  In  Col.  (,4)  opposite  (30)  in  the  year  column,  we  find 
$37.50  the  answer.  $100  per  annum  thus  invested  would  amount 
to  100  times  $37.50,  or  $3,750,  and  similarly  with  reference  to 
other  amounts  and  rates,  for  a  longer  or  shorter  time. 

Table  No.  Q.—What  will  $1.00  per  annum  for  20  years, 
compounded,  annually,  at  6  per  cent,  per  annum,  amount  to  in 
40  years?  In  Col.  (6)  opposite  (40)  in  the  year  column,  we  find 
$125.05  the  answer.  $90  per  annum  thus  invested  would  amount 
to  90  times  $125.05,  or $11,254. 50,  and  similarly  with  reference  to 
other  amounts  and  rates  of  interest,  for  a  longer  or  shorter  time. 

Table  No.  1O.— If  $1.00  be  due  and  payable  40  years  hence, 
and  money  will  earn  4  per  cent,  per  annum,  compound  interest, 
during  that  time,  what  is  the  present  value  of  the  dollar?  In  Col. 
(3),  opposite  (40)  in  the  year  column,  we  find  $.2083— nearly  21 
cents— the  answer;  that  is  to  say  21  cents  invested  40  years,  and 
made  to  earn  4  per  cent,  compound  interest,  annually,  will  just 
exactly  amount  to  the  $1  in  40  years.  Twenty-one  cents  paid 
down  to  day,  or  $1  paid  in  40  years  from  now,  are  equivalent 
sums,  if  money  be  worth  4  per  cent,  per  annum  compound  inter- 
est. The  present  value  of  $50  would  be  50  times  $.2083,  or 
$10.415. 

Table  No.  11.—  What  is  a  contract,  requiring  the  payment  of 
$1  at  the  end  of  evevy  year  for  the  next  40  years,  worth,  now,  as- 
suming money  to  be  worth  5  per  cent,  compound  interest?  In  Col. 
(5)  opposite  (40)  in  the  year  column,  we  find  $17.1591  the  answer. 
In  other  words  $17. 1591,  paid  down  in  one  sum  is  equivalent  to 


OF    LIFE    INSURANCE.  163 

the  payment  of  $1  at  the  end  of  every  year  for  40  years.     Com- 
pare Table  No.  11  with  Table  No.  6. 

Table  No.  12. — How  much  money  must  be  invested  every  year, 
and  compounded,  annually,  at  6  per  cent.,  to  amount  to  $50,000  in 
25  years?  In  Col.  (6)  opposite  (fc5)  in  the  year  column,  we  find 
$17.20.  This  is  the  uniform  annual  investment  requisite  to  pro- 
duce $1,000,  at  the  rate  and  for  the  time  assumed.  To  produce 
$50,000,  the  annual  investment  must  therefore  be  50  times  $17.20, 
or  $860,  the  answer. 

Table  No.  13. — How  much  money  must  be  invested,  every 
year,  for  10  years,  only,  and  compounded,  annually,  at  6  per  cent, 
interest,  to  amount  to  $1,000  in  20  years,  from  beginning  of  the  in- 
vesting period?  In  Col.  (6)  opposite  (20)  in  the  year  column,  we 
find  $39.97  the  answer.  To  produce  $50,000,  multiply  the  $39.97 
by  50,  making  $1,998  50;  and  similarly  with  reference  to  any 
other  amounts,  and  rates  of  interest. 

Table  No.  14. — How  much  money  must  be  invested,  every 
year,  for  15  years,  only,  and  compounded,  annually,  at  4  per  cent, 
interest,  to  amount  to  $1,000  in  30  years,  from  the  beginning  of 
investing  period?  In  Col.  (4)  opposite  (30)  in  the  year  column  we 
find  $26.66,  the  answer.  To  produce  $10,000  the  annual  invest- 
ment must  be  ten  times  $26.66,  and  similarly  with  reference  to 
other  amounts. 

Table  No.  15.— How  much  money  must  be  invested,  every 
year,  for  20  years,  only,  and  compounded,  annually,  at  8  per  cent, 
interest,  to  amount  to  $1,000  in  33  years?  In  Col.  (8)  opposite  (33) 
in  the  year  column,  we  find  $7.44,  the  answer,  and  similarly  with 
reference  to  other  amounts,  etc. 

Table  No.  16.— This  is  the  celebrated  Actuaries'  Table  of 
Mortality,  the  history  of  which  has  been  given  in  another  part  of 
this  book,  with  several  other  columns  added.  Columns  (1)  and 
(2)  constitute  the  table,  proper.  Col.  (3)  is  obtained  by  dividing 
the  number  in  Col.  (2)  opposite  each  age  by  the  number  in  Col.  (1) 
opposite  the  same  age.  Col.  (1)  represents  100,000  persons  living 
at  age  10,  at  the  beginning  of  the  year,  and  Col.  (2)  shows  that 
676  of  them  died  during  the  year.  99,324  lived  to  be  11  years  old, 
but  674  of  them  died  before  they  became  12  years  old,  and  so  on, 
until  they  all  died,  only  one  single  person  of  the  100,000  at  age 
10  reaching  the  age  of  99,  and  he  dies  before  attaining  the  age 
of  100! 

Column  (3)  is  very  instructive.  It  shows  that  at  age  20,  over 
seven  persons  die  during  a  year  out  of  1,000  living  at  the  begin- 
ning of  the  same  year;  at  age  25,  nearly  eight  die;  at  30,  nearly 
eight  and  one  half ;  at  35,  more  than  nine  and  one-quarter;  at  40, 
more  than  ten  and  one-third;  at  45,  nearly  twelve  and  one-quarter; 


164  THE    THREE    SYSTEMS 

at  50,  nearly  sixteen;  at  55,  nearly  twenty '-two;  at  60,  over  thirty; 
at  65,  over  forty- four;  at  70,  nearly  sixty-five;  at  75,  over  ninety- 
five;  at  80,  over  one  hundred  and  forty;  at  85,  over  two  hundred 
and  five;  at  90,  nearly  three  hundred  and  twenty-four;  at  95,  over 
jive  hundred  and  eighty -four;  and,  at  age  99,  one  thousand 
persons  die  during"  the  year  out  of  one  thousand  living 
at  the  beginning1  of  the  year.  Taking  the  same  number  of 
persons  at  each  of  the  ages,  and  noting  the  comparative  number 
of  deaths;  we  find  that  more  than  twice  as  many  die  at  50  as  at 
25;  more  than  twice  as  many  at  61  as  at  50;  nearly  twice  as  many 
at  70  as  at  61 ;  more  than  twice  as  many  at  80  as  at  70,  and  so  on. 
The  per  cent,  of  deaths  increases  very  rapidly  after  55,  when 
many  of  our  assessment  companies  cease  grading  their  rates,  if, 
indeed,  they  grade  them  at  all  after  entry! 

Column  (4)  gives  the  expectation  of  life  at  the  different  ages. 
For  example,  at  age  10,  the  average  of  after  life  is  48  years  and 
30-100  of  a  year;  at  age  32,  it  is  about  thirty- three  years,  and 
so  on. 

Column  (5)  gives  the  net  level  annual  premiums  for  insuring 
$1,000  for  life,  at  the  different  ages.  These  premiums  louded  from 
twenty-five  to  forty  per  cent.,  varying  with  different  companies, 
constitute  the  table  rates  found  in  the  rate  books  of  Level  Pre- 
mium Companies,  for  $1,000  of  ordinary  life  insurance. 

Column  (6)  gives  the  natural  premiums  at  the  different  ages. 
This  column  is  the  basis  of  rates  for  the  Natural  Premium  Com- 
panies, and  the  better  class  of  Assessment  Associations,  of  which 
much  has  been  said  in  previous  pages. 

Table  No.  17. — Remarks  similar  to  those  made  with  refer- 
ence to  Table  No.  16  can  be  appropriately  made  with  reference 
to  this  table.  Both  tables  are  very  extensively  used. 

Table  No.   18.— Fully  explained. 

Table  No.  19.— Fully  explained  and  frequently  referred  to 
in  other  pages. 

Other  Tables,  A,  B,  C,  D,  etc.,  etc.,  are  used  in  explanation  of 
facts  and  principles  stated,  and  are  readily  understood  in  the 
application  thus  made  of  them. 


166 

TABLE 

Showing  the  elements  of  which  a  Level  An- 
composed,  based  on  the  Actuaries'  Table 


AGE. 

Reserve 
element. 

Mortality 
element. 

Expense 
element. 

Gross  Level 
premium. 

Col.  i. 

Col.  ». 

Col.  3. 

Col.  4. 

10 

$3.96 

$6.47 

$3.48 

$13.91 

11 

4  13 

6.50 

3.54 

14.17 

12 

4.32 

6.52 

3.61 

14.45 

13 

4.51 

6.56 

3.69 

14.76 

14 

4.70 

6.60 

3.77 

15.07 

15 

4.90 

6.64 

3.85 

15.39 

16 

5.10 

6.70 

3.93 

15.73 

17 

5.31 

6.76 

4.02 

16.09 

18 

5.54 

6.81 

4.12 

16.47 

19 

5.76 

6.88 

4.22 

16.86 

20 

5.98 

6.97 

4.32 

1727 

21 

6.20 

7.07 

4.43 

17.70 

22 

6/48 

7.13 

4/54 

18  15 

23 

6.74 

7.22 

4.66 

18.62 

24 

7.02 

7.31 

4.78 

19.11 

25 

7.31 

7.41 

4.91 

19.63 

26 

7.61 

7.52 

5.04 

20.17 

27- 

7.92 

7T64 

£18 

20.74 

28 

8.25 

7.76 

5.33 

21.34 

29 

8.59 

7.89 

5.49 

21.97 

30 

8.95 

8.02 

5.66 

22.63 

31 

9.34 

8.15 

5.83 

23.32 

32 

9.72 

8.32 

6.01 

24.05 

33 

10.13 

8.49 

6.20 

24.82 

34 

10.50 

8.73 

6.40 

25.63 

35 

11.04 

8.83 

6.62 

26.49 

36 

11.53 

9.01 

6.85 

27.39 

37 

12.07 

9.19 

7.09 

28.35 

38 

12.62 

9.40 

7.34 

29.36 

39 

13.22 

9.60 

7.61 

30.43 

40 

13.86 

9.82 

7.89 

31.57 

41 

14.54 

10.05 

8.19 

32.78 

42 

15.25 

10.30 

8.52 

34.07 

43 

15.95 

10.64 

8.86 

35.45 

44 

16.63 

11.05 

9.23 

36.91 

45 

17.31 

11.54 

9.61 

38.46 

46 

17.97 

12.11 

10.03 

40.11 

47 

18.64 

12.75 

10.46 

41.85 

48 

19.33 

13.44 

10.92 

43.69 

49 

20.06 

14.17 

11.41 

45.64 

50 

20.78 

15.00 

11.92 

47.70 

51 

21.53 

15.89 

12.47 

49.89 

52 

22.29 

16.86 

13.06 

52.21 

53 

23.08 

17-92 

13.66 

54.66 

54 

23.90 

19.05 

14.32 

57.27 

1 

167 

No.  t. 

nual  Life  Premium  for  $|,OOO  of  Insurance  is 
of  Mortality,  and  4  per  cent,  interest. 


AGE. 

Reserve 
element. 

Mortality 
element. 

Expense 
element. 

Gross  Level 
Premium. 

Col.  i. 

Col.  2. 

Col.  3. 

Col.   4. 

55 

$24.73 

$20.30 

$15  01 

$  60.04 

56 

25.59 

21.64 

15.75 

62.98 

57 

26.50 

23.07 

16.53 

66.10 

58 

27.42 

24.65 

17.35 

69.42 

59 

28.37 

26.35 

18.25 

72.97 

60 

29.27 

28.29 

19.19 

76.75 

61 

30.20 

30.37 

20.19 

80.76 

62 

81.11 

32.67 

21.26 

85.04 

63 

32.03 

35.17 

22.40 

89.60 

64 

32.93 

37.91 

23.61 

94.45 

65 

33.84 

40.88 

24  90 

99.62 

66 

34.70 

44.15 

26.28 

105.13 

67 

35.58 

47.66 

27.74 

110.98 

68 

36.45 

51.46 

29.31 

117.22 

69 

37.36 

55.53 

30.97 

123.86 

70 

38.25 

59.95 

32.74 

130.94 

71 

39.15 

64.72 

34.62 

138.49 

72 

40.06 

69.85 

36.64 

146.55 

73 

40.97 

75.39 

38.79 

155.15 

74 

41.89 

81.36 

41.08 

164.33 

75 

42.82 

87.79 

43.54 

174.15 

76 

43.80 

94.69 

46.16 

184.65 

77 

44.75 

102.19 

48.95 

195.89 

78 

45.67 

110.31 

51.99 

207.97 

79 

44.69 

118.99 

55.23 

220.91 

80 

47.80 

128.60 

58.70 

234.80 

81 

49.16 

138.16 

62.44 

249.76 

82 

50.87 

148.62 

66.49 

265.98 

83 

52.95 

159.83 

70.93 

283.71 

84 

55.58 

171.84 

75.81 

303.23 

85 

58.53 

185.20 

81.24 

324.97 

86 

61.87 

200.16 

87.34 

349.37 

87 

65.68 

217.01 

94.23 

376.62 

88 

69.62 

236.61 

102.08 

408.31 

89 

73.50 

259.65 

111.05 

444.20 

90 

77.70 

286.20 

121.30 

485.20 

91 

81.76 

317.51 

133.09 

532.36 

92 

84.54 

355.41 

146.65 

586.59 

93 

85.54 

400.53 

162.02 

648.09 

94 

84.43 

452.86 

179.09 

716.38 

95 

74.38 

519.05 

197.57 

790.28 

96 

62.38 

583.24 

215.21 

860.83 

97 

89.04 

604.04 

231.03 

924.11 

98 

186.34 

581.40 

255.91 

1,023.65 

99 

961.54 

320.51 

1,282.05 

:^  ~        F.   —  -z 

168 


TABLE 

Showing  the  elements   of  which    a  Natural 
based  on  the  Actuaries'  Table  of 


AGE. 

Mortality 
element. 

Expense 
element. 

Gross  Natural 
Premiums, 

Col.  i. 

Col.  2. 

Col.  3. 

10 

$6.50 

$2.17 

$  8.67 

11 

6.53 

2.18 

8.71 

12 

6.55 

2.19 

8.74 

13 

6.59 

2.20 

8.79 

14 

6.63 

2.21 

8.84 

15 

6.68 

2.23 

8.91 

16 

6.73 

2.24 

8.97 

17 

6.79 

2.26 

9.05 

18 

6.86 

3.29 

9.15 

19 

6.93 

2.31 

9.24 

20 

7.01 

2.34 

9.35 

21 

7.09 

2.36 

9.45 

22 

7.18 

2.39 

9.57 

23 

7.27 

2.42 

9.69 

24 

7.37 

2.46 

9.83 

25 

7.47 

2.49 

9.96 

26 

7.58 

2.53 

10.11 

27 

7.70 

2.57 

10.27 

28 

7.83 

2.61 

10.44 

29 

7.96 

2.65 

10.61 

30 

8.10 

2.70 

10.80 

31 

8.25 

2.75 

11.00 

32 

8.41 

2.80 

11.21 

33 

8.58 

2.86 

11.44 

34 

8.75 

2.92 

11.67 

35 

8.93 

2.98 

11.91 

86 

9.12 

3.04 

12.16 

37 

9.31 

3.10 

12.41 

38 

9.53 

3.18 

12.71 

39 

9.74 

3.25 

12.99 

40 

9.95 

3.32 

13.28 

41 

10.20 

3.40 

13.60 

42 

10.48 

3.49 

13.97 

43 

10.82 

3.61 

14.43 

44 

11.25 

3.74 

15.00 

45 

11.74 

3.91 

15.65 

46 

12.35 

4.12 

16.47 

47 

13.00 

4.33 

17.33 

48 

13.71 

4.57 

18.28 

40 

14.48 

4.83 

19.31 

50 

15.33 

5.11 

20.44 

51 

16.25 

5.42 

21.67 

52 

17.26 

5.75 

23.01 

53 

18.36 

6.12 

24.48 

54 

19.53 

6.51 

26.04 

169 


Annual  Life  Premium  for  $l,OOO  is  composed, 
Mortality,  and  4  per  cent,  interest. 


AGE, 

Mortality 
element. 

Expense 
element. 

Gross  Natural 
Premium. 

Col.  t. 

Col.     2. 

Col.  3. 

55 

$20.83 

$6.91 

$27.77 

56 

22.24 

7.41 

29.65 

57 

23.73 

7.91 

31.64 

58 

25.37 

8.46 

33.83 

59 

27.16 

9.05 

36  21 

60 

29.17 

9.72 

38.89 

61 

31.36 

10.45 

41.81 

62 

33.77 

11.26 

45.03 

63 

36.38 

12.13 

48.51 

64 

39.26 

13.09 

52.35 

65 

42.39 

14.13 

56.52 

66 

45.78 

15.26 

61.04 

67 

49.49 

16.49 

65.98 

68 

53.49 

17.83 

71.32 

69 

57.78 

19.26 

77.04 

70 

62.44 

20.81 

83.25 

71 

67.46 

22.49 

89.95 

72 

72.89 

24.29 

97.18 

73 

78.73 

26.24 

104.97 

74 

85.07 

28.36 

113.43 

75 

91.89 

30.63 

122.52 

76 

99.21 

33.07 

132.28 

77 

107.18 

35.73 

142.91 

78 

115.81 

38.60 

154.41 

79 

125.06 

41.69 

166.75 

80 

135.01 

45.00 

180.01 

81 

145.61 

46.40 

192.01 

82 

156.92 

52.31 

209.23 

83 

169.15 

56  38 

225.53 

84 

182.38 

60  79 

243.17 

85 

197.21 

65.74 

262.95 

86 

213.92 

71.31 

285.23 

87 

232.92 

77.64 

310.56 

88 

255.07 

85.02 

340.09 

89 

281.14 

93.71 

374.85 

90 

311.28 

103.76 

415.04 

91 

347.10 

115.70 

462.80 

92 

389,68 

129.89 

519.57 

93 

439.64 

146.55 

586.19 

94 

496.45 

165.48 

661.93 

95 

561.80 

187.27 

749.07 

96 

623.70 

207.90 

831.60 

97 

665.68 

221.89 

887.57 

98 

721  .  15 

240.38 

961.53 

99 

961.54 

320.51 

1,282.05 

170 


TABLE 

Showing  how  much  SI.OO  per  annum 

from   i  to 


YEARS. 

3 

Per  cent. 

4 

Per  cent. 

Per  cent. 

6 

Per  cent. 

Col.  i. 

Col.  -2. 

Col    3 

Col.  4. 

1 

$1.03 

$1.04 

$1.05 

$1.06 

2 

2.09 

2.12 

2.15 

2.18 

3 

3.18 

3.24 

3.30 

3.36 

4 

4.30 

4.40 

4.50 

4.60 

5 

5.45 

5.60 

5.75 

5.90 

6 

6.63 

6.84 

7.05 

7.26 

7 

7.84 

8.12 

8.40 

8.68 

8 

9.08 

9.44 

9.80 

10.16 

9 

10.35 

10.80 

11.25 

11.70 

10 

11.65 

12.20 

12.75 

13.30 

11 

12.98 

13.64 

14.30 

14.96 

12 

14  34 

15.12 

15.90 

16.68 

13 

15.73 

16.64 

17.55 

18.46 

14 

17.15 

18.20 

19.25 

20.30 

15 

18.60 

19.80 

21.00 

22.20 

16 

20.08 

21.44 

22.80 

24.16 

17 

21.59 

23.12 

24.65 

26.18 

18 

23.13 

24.84 

26.55 

28.26 

19 

24.70 

26.60 

28  50 

30.40 

20 

26.30 

28.40 

30.50 

32.60 

21 

27.93 

30.24 

32.55 

34.86 

22 

29.59 

32.12 

34.65 

37.18 

23 

31.28 

34.04 

36.80 

39.56 

24 

33.00 

36.ro 

39.00 

42.00 

25 

34.75 

38.00 

41/25 

44.50 

26 

36.53 

40  04 

43.55 

47.06 

27 

38.34 

42.12 

45.90 

49.68 

28 

40.18 

44.24 

48.30 

52.36 

29 

42.05 

46  40 

50.75 

55.10 

30 

43.95 

48.60 

53.25 

57.90 

31 

45.88 

50.84 

55.80 

60.76 

32 

47.84 

53.12 

58.40 

63.68 

33 

49.83 

55.44 

61.05 

66.66 

34 

51.85 

57.80 

63.75 

69.70 

35 

53.90 

60.20 

66.50 

72.80 

36 

55.98 

62.64 

69.30 

75.96 

37 

58.09 

65.12 

72.15 

79.18 

38 

60.23 

67.64 

75.05 

82.46 

39 

62.40 

70.20 

78.00 

85.80 

40 

64.60 

72.80 

81.00 

89.20 

41 

66.83 

75.44 

84.05 

92.66 

42 

69.09 

78.12 

87.15 

96.18 

43 

71.38 

80.84 

90.30 

99.76 

44 

73.70 

83.60 

93.50 

103.40 

45 

76.05 

86.40 

96.75 

107.10 

46 

78.43 

89.24 

100.05 

110.86 

47 

80.84 

92.12 

103.40 

114.68 

48 

83.28 

95.04 

106.80 

118  56 

49 

85.75 

98.00 

110.25 

122.50 

50 

88.25 

101.00 

113.75 

126.50 

No.  4. 

will  amount  to,  at  Simple  Interest,  in 
5O  Years. 


171 


Per  cent. 

8 

Per  cent. 

9 

Per  cent. 

10 

Per  cent. 

YEARS, 

Col.  5 

Col.  6. 

Col.  7. 

Col.  8. 

$1.07 

$1.08 

$1.09 

$1.10 

1 

2.21 

2.24 

2  27 

2.30 

2 

3.42 

3.48 

3.54 

3.60 

3 

4.70 

4.80 

4.90 

5.00 

4 

6.05 

6.20 

6.35 

6.50 

5 

7.47 

7.68 

7.89 

8.10 

6 

8.96 

9.24 

9.52 

9.80 

7 

10.52 

10.88 

11.24 

11.60 

8 

12.15 

12.60 

13.05 

13.50 

9 

13.85 

14.40 

14.95 

15.50 

10 

15.62 

16.28 

16.94 

17.60 

11 

17.46 

18.24 

19.02 

19.80 

12 

19.37 

20.28 

21.19 

22.10 

13 

21.35 

22.40 

23.45 

24.50 

14 

23.40 

24.60 

25.80 

27.00 

15 

25.52 

26.88 

28.24 

29.60 

16 

27.71 

29.24 

30.77 

32.30 

17 

29.97 

31.68 

33.39 

35.10 

18 

32.30 

34.20 

36.10 

38.00 

19 

34.70 

36.80 

38.90 

41.00 

20 

37.  J7 

39.48 

41.79 

44.10 

21 

39.71 

42.24 

44.77 

47.30 

22 

42.32 

45.08 

47.84 

50.60 

23 

45.00 

48.00 

51.00 

54.00 

24 

47.75 

51  00 

54.25 

57.50 

25 

50.57 

54  08 

57.59 

61.10 

26 

53.46 

57.24 

61.02 

64.80 

27 

56.42 

60.48 

64.54 

68.60 

28 

59.45 

63.80 

68.15 

72.50 

29 

62.55 

67.20 

71-85 

76.50 

30 

65.72 

70.68 

75.64 

80.60 

31 

68.96 

74.24 

79.52 

84.80 

32 

72.27 

77.88 

83.49 

89.10 

33 

75.65 

81.60 

87.55 

93.50 

34 

79.10 

85.40 

91.70 

98.00 

35 

82.62 

89.28 

95.94 

102,60 

36 

86.21 

93.24 

100  27 

107.30 

37 

89.87 

97.28 

104.69 

112.10 

38 

93.60 

101.40 

109.20 

117.00 

39 

97.40 

105.60 

113.80 

122.00 

40 

101.27 

109.88 

118.49 

127.10 

41 

105.21 

114.24 

123.27 

132.30 

42 

109.22 

118.68 

128.14 

137.60 

43 

113.30 

123.20 

133.10 

143.00 

44 

117.45 

127.80 

138.15 

148.50 

45 

121.67 

132.48 

143.29 

154.10 

46 

125.96 

137.24 

148.52 

159.80 

47 

130.32 

142.08 

153.84 

165.60 

48 

134.75 

147.00 

159.25 

171.50 

49 

139.25 

152.00 

164.75 

177.50 

50 

172 


TABLE 

Showing  how  much  $LOO  will  amount 


YEARS. 

P   3 

3H         1 

Pertnt 

Parent 

Percent 

Col    i. 

Col.  y. 

Col.  3. 

Col.  4. 

Col.  5. 

1 

$1.030 

$1.035 

$1.040 

$1.045 

$1.050 

2 

1.061 

1.071 

1.082 

1.092 

1.103 

3 

1.093 

1.109 

1.125 

1.141 

1.158 

4 

1.126 

1.148 

1.170 

1.193 

1.216 

5 

1.159 

1.188 

1.217 

1.246 

1.276 

6 

1.194 

1.229 

1.265 

1.302 

1.340 

7 

1.230 

1.272 

1.316 

1.361 

1.407 

8 

1.267 

1.317 

1.369 

1.422 

1.478 

9 

1.305 

1.363 

1.423 

1.486 

.551 

10 

344 

1.411 

1.480 

1.553 

.629 

11 

.384 

1.460 

1.540 

1.623 

.710 

12 

.426 

1.511 

1.601 

1.696 

.796 

13 

.469 

1.564 

1.665 

1.772 

.886 

14 

.513 

1.619 

1.732 

1.852 

.980 

15 

558 

1.675 

1.801 

1.935 

2.079 

16 

1.605 

1.734 

1.873 

2.022 

2.183 

17 

1.653 

1.795 

1.948 

2.113 

2.292 

18 

1.702 

1.858 

2.026 

2.209 

2.407 

19 

1.754 

1.923 

2.107 

2.308 

2.527 

20 

1.806 

1.990 

2.191 

2.412 

2.653 

21 

1.860 

2.059 

2.279 

2.520 

2.786 

22 

1.916 

2.132 

2.370 

2.634 

2.925 

23 

1.974 

2.206 

2.465 

2.752 

3.072 

34 

2.033 

2.283 

2.563 

2.876 

3.225 

25 

2.094 

2.363 

2.666 

3.005 

3.386 

26 

2.157 

2.446 

2.773 

3.141 

3.556 

27 

2.221 

2.532 

2.883 

3.282 

3.734 

28 

2.288 

2.620 

2.999 

3.430 

3.920 

29 

2.357 

2.712 

3.119 

3.584 

4.116 

30 

2.427 

2.807 

3243 

3.745 

4.322 

31 

2.500 

2.905 

3.373 

3.914 

4.538 

32 

2.575 

3.007 

3.508 

4.090 

4.765 

33 

2.652 

3.112 

3.648 

4.274 

5.003 

34 

2,732 

3.221 

3.794 

4.466 

5.253 

35 

2.814 

3.334 

3.946 

4.667 

5.516 

36 

2.898 

3.450 

4.104 

4877 

5.792 

37 

2.985 

3.571 

4.268 

5.097 

6.081 

38 

3.075 

3.696 

4.439 

5.326 

6.386 

39 

3.167 

3.825 

4.616 

5.566 

6.705 

40 

3.262 

3.959 

4.801 

5.816 

7.040 

41 

3.360 

4.098 

4.993 

6.078 

7.392 

42 

3461 

4.241 

5.193 

6.352 

7.762 

43 

3.565 

4.390 

5.401 

6.637 

8.150 

44 

3.672 

4543 

5*617 

0.936 

8.557 

45 

3.782 

4.702 

5.841 

7.248 

8.985 

46 

3.895 

4.867 

6.075 

7.574 

9.434 

47 

4.012 

5.037 

6.318 

7.915 

9.906 

48 

4.132 

5.214 

6571 

8.272 

10.401 

49 

4.256 

5.396 

6.833 

8.644 

10.921 

50 

4.384 

5.585 

7.107 

9.033 

11.4B7 

No.  5. 

to  compounded  annually,  for  i  to  5O  years. 


173 


6 

Per  cent. 

Per  c  en  . 

Per  cent. 

9 

Per  cent. 

10 

Per  cent. 

YEARS. 

Col.  6. 

Col.  7. 

Col  8. 

Col.  9. 

Col.  10. 

$1.060 

$  1.070 

$    1.080 

$   1.090 

$  1.100 

1 

1.1144 

1.145 

1.166 

1.188 

1.210 

2 

1.191 

1.225 

1.260 

1.295 

1.331 

3 

1.263 

1.311 

1.361 

1.412 

1.464 

4 

1.338 

1.403 

1.469 

1.539 

1.611 

5 

1.419 

1.501 

1.587 

1.677 

1.772 

6 

1.504 

1.606 

1.714 

1.828 

1.949 

7 

1.594 

1.718 

1.851 

1.993 

2.144 

8 

1.690 

1.839 

1.999 

2.172 

2.358 

9 

1.791 

1.967 

2.159 

2.367 

2.594 

10 

1.898 

2.105 

2.332 

2.580 

2.853 

11 

2.012 

2.252 

2.518 

2813 

3.138 

12 

2.133 

2.410 

2.720 

3.066 

3.452 

13 

2.261 

2.579 

2.937 

3.342 

3.798 

14 

2.397 

2.759 

3.172 

3.643 

4.177 

15 

2.540 

2.952 

3.426 

3.970 

4.595 

16 

2.693 

3.159 

3.700 

4.328 

5.055 

17 

2.854 

3.380 

3.996 

4.717 

5.560 

18 

3.026 

3.617 

4.316 

5.142 

6.116 

19 

3.207 

3.870 

4.661 

5.604 

6.728 

20 

3.400 

4.141 

5.034 

6.109 

7.400 

21 

3.604 

4.430 

5.437 

6.659 

8.140 

22 

3820 

4.741 

5.872 

7.258 

8.954 

23 

4.049 

5.072 

6.341 

7.911 

9.850 

24 

4.292 

5.427 

6.849 

8.623 

10.835 

25 

4.549 

5.807 

7.396 

9.399 

11  918 

26 

4.822 

6.214 

7.988 

10.245 

13.110 

27 

5.112 

6.649 

8.627 

11.167 

14.421 

28 

5.418 

7.114 

9.317 

12.  172 

15.863 

29 

5.744 

7.612 

10.063 

13.268 

17.449 

30 

6.088 

8.145 

10.868 

14.462 

19.194 

31 

6453 

8.715 

11.737 

15.763 

21.114 

32 

6.841 

9325 

12.676 

17.182 

23.225 

33 

7.251 

9.978 

13.690 

18.728 

25.548 

34 

7.686 

10.677 

14.785 

20.414 

28.102 

35 

8.147 

.  11.424 

15.968 

22.251 

30.913 

36 

8.6S6 

12.224 

17.246 

24.254 

34.004 

37 

9.154 

13.079 

18.625 

26.437 

37.404 

38 

9.704 

13.995 

20.115 

28.816 

41.145 

39 

10.286 

14.975 

21  725 

31.409 

45.259 

40 

10.903 

16.023 

23.463 

34.236 

49.785 

41 

11.557 

17.144 

25.340 

37.318 

54.764 

42 

12.251 

18344 

27.367 

40.676 

60.240 

43 

12.986 

19.629 

29.556 

44.337 

66.264 

44 

13.765 

21.003 

31.920 

48.327 

72.891 

45 

14.591 

22.473 

34.474 

52.677 

80.180 

46 

15.466 

24.046 

37.232 

57.418 

88.198 

47 

16.394 

25.729 

40.211 

62.585 

97.017 

48 

17.378 

27.530 

43.427 

68.218 

106.719 

49 

18.420 

29.457 

46.903 

74.358 

117.391 

50 

174 


TABLE 

Showing  how  much  $J.OO  per  annum 

annually,  for 


YEARS. 

Per  cent. 

3H 

Per  cent. 

4 

Per  cent. 

4l/2 

Per  cent. 

5 

Per  cent. 

Col.  i. 

Col  -2. 

Col.  3. 

Col.  a. 

Col  5. 

1 

1.030* 

1.035 

1.040 

1.045 

1.050 

» 

2.091 

2.106 

2  122 

2.137 

2.J53 

3 

3.184 

3.215 

3247 

3.278 

3.310 

4 

4.309 

4.363 

4.416 

4471 

4.526 

5 

5.468 

5.550 

5.633 

5.717 

5.802 

6 

6.663 

6779 

6.898 

7019 

7.142 

7 

7.892 

8.052 

8.214 

8.380 

8.549 

8 

9.159 

9.369 

9.583 

9.802 

10.027 

9 

10.464 

10.731 

11.006 

11.288 

11.578 

10 

11.808 

12.142 

12.486 

12.841 

13.207 

11 

13.19:3 

13.602 

14.026 

14.464 

14.917 

12 

14.618 

15.113 

15.627 

16.160 

16.713 

13 

16086 

16.677 

17.292 

17.932 

18.599 

14 

17.599 

18.296 

19.024 

19.784 

20,579 

15 

19.157 

19.971 

20.825 

21.719 

22.658 

16 

20.762 

21.705 

22.098 

23.742 

24/840 

17 

22.414 

23.500 

24.645 

25.855 

27.132 

18 

24.117 

25.357 

26.671 

28.064 

29.539 

19 

25.870 

27.280 

28.778 

30.371 

32.066 

20 

27.677 

29.270 

30.969 

32.783 

34.719 

21 

29.537 

31.329 

33.248     35.303 

37.505 

22 

31.453 

33.460 

35.618     37.937 

40.431 

23 

33.427 

35.667 

38.083     40.689 

43.502 

24 

35.459 

37.950 

40.646     43.565 

46.727 

25 

37.553 

^40.313 

43.312     46  571 

50.114 

26     39.710 

42.759 

46.084     49.711 

53.669 

27     41.931 

45.291     48.968     5v».993 

57.403 

28 

44.219 

47.911     51.966     56.423    61.323 

29 

46.575 

50.623 

55.085     60.007 

65.439 

30 
31 

49.003 
51.503 

53  430 
56.335 

58.323. 
6l.70r 

63.752 
67.666 

69.761 
74.299 

32 

54.078 

59.341 

65.210 

71.756 

79.064 

33 

56.730 

62.453 

68.858 

76.030 

84.067 

34 

59.462 

65.674 

72.652 

80.497 

89.320 

35 

62.276 

69.008 

76.598 

85.164 

94.836 

36 

65.174 

72.458 

80.702 

90.041 

100.628 

37 

68.159 

76.029 

84.970 

95.138 

106.710 

38 

71.234 

79.725 

89.409 

100.464 

113095 

39 

74.401 

83.550 

94.026 

106.030 

119.800 

40 

77.663     87.510 

98.827 

111.847 

126.840 

41 

81.023 

91.607 

103.820 

117.925 

134.232 

42 

84.484 

95.849 

109.012 

124.276 

141.993 

43 

88.048 

100.238 

114.413 

130.914 

150.143 

44 

91.720 

104.782 

120.029 

137.850 

158.700 

45 

95.502 

109.484 

125.871 

145.098 

167.685 

46 

99.397 

114.351 

131.945 

152  673 

177.119 

47 

103.408 

119.388 

138.263 

160.588 

187.025 

48 

107.541 

124.602 

144.834 

168.859 

197.427 

49 

111.797 

129.998 

151.667 

177.503 

208.348 

50 

116.182 

135.583 

159.274 

186.536 

219.815 

No.  6. 

will  amount  to,  compounded, 
I  to  5O  years. 


175 


6 

Per  cent. 

Per  cent. 

8( 

Per  cent. 

9 

Per  cent. 

10 

Per  cent 

YEARS. 

Col.  6. 

Col.  7 

Col.  8.   " 

•  Col.  9. 

Col.  10. 

1.060 

1.070 

1.080 

1.090 

1.100 

1 

2184 

2.215 

2.246 

2.278 

2.310 

2 

8.375 

3.440 

3.506 

3.573 

3.641 

3 

4.637 

4.751 

4.867 

4.985 

5.105 

4 

5.975 

6.153 

6.336 

6,523 

6.716 

5 

7.394 

7.654 

7.923 

8.200 

8.487 

6 

8.898 

9.260 

9.637 

10.029 

10.436 

7 

10.491 

10.978 

11.488 

12.021 

12,580 

8 

12.181 

12.816 

13.487 

14.193 

14.937 

9 

13.972 

14.784 

15.646 

16.560 

17531 

10 

15.870 

16.889 

17.977 

19.141 

20.384 

11 

17.882 

19.141 

20.495 

21.953 

23.523 

12 

20.015 

21.551 

23.215 

25.019 

26.975 

13 

22.276 

24.129 

26.  152 

28.361 

30773 

14 

24.673 

26.888 

29.324 

32.003 

34  950 

15 

27  213 

29.840 

32.750 

35.974 

39.545 

16 

29.906 

32.999 

36.450. 

40.301 

44.599 

17 

32.760. 

36.379 

40.446 

45.019 

50.159 

18 

35.786 

39.996 

44.762 

50.160 

56.275 

19 

38.993 

43.865^ 

49.423 

55.765 

63.003 

20 

42.392 

48.006 

54.457 

61873 

70.403 

21 

45.996 

52.436 

59.893 

68.532 

78.543 

22 

49.816 

57.177 

65.765 

75.790 

87.497 

23 

53.865 

62.249 

72.100 

83.701 

97.347 

24 

58.156 

67.677 

78.954 

92.324 

108.182 

25 

62.706 

73.484 

86.351 

101.723 

120.  100 

26 

67.528 

79.698 

94.339 

111.968 

133.210 

27 

72.640 

86.347 

102.966 

123.135 

147.631 

28 

78.058 

93.461 

112.283 

135.308 

163.494 

29 

83.802 

101.073 

1:2.346 

148.575 

180  943 

30 

89.890 

109.218 

133.214 

163.037 

200.138 

31 

96.343 

117.933 

144.951 

178.800 

221.252 

32 

103.184 

127.259 

157.627 

195.982 

244.477 

33 

110.435 

137.237 

171.317 

214.711 

270.024 

34 

118.121 

147.914 

186.102 

235  125 

298.127 

35 

126.268 

159.337 

202.070 

257.376 

329.040 

36 

13  1.  904 

171.561 

219.316 

281.630 

363.043 

37 

144.059 

184.640 

237.941 

308.067 

400.448 

38 

153  762 

198.635 

258.057 

336.882 

441.593 

39 

164.048 

213.610 

279.781 

368.292 

486.852 

40 

174.951 

229.632 

303.244 

402.528 

536.637 

41 

186.508 

246.777 

328.583 

439.846 

591.401 

42 

198.758 

265.121 

355.950 

480.522 

651.641 

43 

211.744 

284.749 

385.506 

524  859 

717.905 

44 

225.508 

305.752 

417.426 

573.186 

790.  795 

45 

240.099 

328.224 

451.900 

625.863 

870.975 

46 

255.565 

352.270 

489.132 

683.280 

959.172 

47 

271.958 

377.999 

529.343 

745.866 

1,056.190 

48 

289.336 

405.529 

572.770 

814.084 

1,162.909 

49 

307.756 

434.986 

619.672 

888.441 

1,280.299 

50 

176 


TABLE 

Showing  how  much  $|.OO  per  annum,  for 

annually  for 


YEARS. 

Per  cent. 

31/* 

Per  cent. 

Pertn, 

PefL, 

5 

Per  cent. 

Col.  i. 

Col.  2.     * 

Col.  3. 

Col.  4. 

Col    5. 

11 

12.16 

12.57 

12  99 

13.42 

13.87 

12 

12.53 

1300 

1351 

14.02 

14.56 

13 

12.90 

13.46 

14.05 

14.65 

15.29 

14 

13.29 

13.93 

14.6L 

15.31 

16.05 

15 

13.69 

14,42 

15.19 

16.00 

16.86 

16 

14.10 

14.93 

15.80 

16.72 

17.70 

17 

14.52 

15.45 

16.43 

17.48 

18.58 

18 

14.96 

15.99 

17.09 

18.26 

19.51 

19 

15.41 

16.55 

17.77 

19.08 

20.49 

20 

15.87 

17.13 

18.48 

19.94 

21.51 

21 

16.34 

17.73 

19.22 

20.84 

22.59 

22 

16.84 

18.35 

19.99 

21.78 

23^72 

23 

17.34 

18.99 

20.79 

22.76 

25.60 

24 

17.86 

19.65 

21.62 

23.78 

26.15 

25 

18.40 

20.34 

22.49 

24.85 

27.46 

26 

18.95 

21.05 

23.39 

25.97 

28.83 

27 

19.52 

21.79 

24.32 

27.14 

30.27 

28 

20.10 

22.55 

25.29 

28.36 

31.78 

29 

20.71 

23.34 

26.31 

29.64 

33.37 

30 

21.33 

24.16 

27.36 

30.97 

35.04 

31 

21  97 

25.01 

28.45 

32.36 

36.79 

32 

22.62 

25.88 

29.59 

33.82 

38.63 

33 

23.30 

26.79 

30.78 

35.34 

40.56 

34 

2400 

27.72 

32.00 

3693 

4259 

35 

24.72 

28.69 

33.29 

38.59 

44.72 

36 

25.46 

29.70 

34.62 

40.33 

46.96 

37 

26.23 

30.74 

36.00 

42.14 

49.31 

38 

27.02 

31.81 

37.44 

44.04 

51.77 

39 

27.82 

32.93 

38.94 

46.02 

54.36 

40 

28.67 

34.08 

40.50 

48.09 

57.08 

41 

29.52 

35.27 

42.12 

50.26 

59.93 

42 

30.41 

36.51 

43.80 

52.52 

62.93 

43 

31.32 

37.78 

45.56 

54.88 

66.08 

44 

32.26 

39.11 

47.38 

57.35 

69.38 

45 

83.23 

40.48 

49.27 

59.93 

72.85 

46 

34.22 

41.89 

51.24 

62.63 

76.49 

47 

35.25 

43.36 

53.29 

65.45 

80.32 

48 

36.31 

44.88 

55.42 

68,39 

84.33 

49 

37.40 

46.45 

57.64 

71.47 

88.55 

50 

38.52 

48.07 

59.95 

74.69 

92.98 

No.   7. 

IO  years,  will  amount  to  compounded 
(I  to  50  years. 


177 


Per  cent. 

PerLt. 

Perlei,, 

Percent 

10 

Per  cent. 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9. 

Col.  10. 

14.81 

15.82 

16.90 

18.05 

1928 

11 

15.70 

16.93 

18.25 

19.67 

21.21 

12 

16.64 

18.11 

19.71 

21.45 

23.33 

13 

17.64 

19.38 

21.29 

23.38 

25.67 

14 

18.70 

20.74 

22.99 

25.48 

28.23 

15 

19.82 

22.19 

24.83 

27.77 

31.06 

16 

21.01 

23.74 

26.81 

30.27 

34.16 

17 

22.17 

25.40 

28.96 

33.00 

37.58 

18 

23.61 

27.18 

31.28 

35.97 

41.34 

19 

25.02 

29.08 

33.78 

39.20 

45.47 

20 

26.52 

32.75 

36.48 

42.73 

50.02 

21 

28.11 

33.30 

39.40 

46.58 

55.01 

22 

29.80 

35.63 

42.55 

50.77 

60.52 

23 

31.59 

38.12 

45.95 

55.34 

66.57 

24 

33.48 

40.79 

49.63 

60.32 

73.23 

25 

34.98 

43.64 

53.60 

65.74 

80.56 

26 

37.62 

46.70 

57.89 

71.67 

88.61 

27 

3988 

49.97 

62.52 

78.11 

97.47 

28 

42.27 

53.46 

67.52 

85.15 

107.20 

29 

44.81 

57.21 

72.92 

92.80 

117.94 

30 

47.50 

61.21 

78.76 

101.16 

129.73 

31 

50.35 

65.50 

85.06 

110.27 

142,70 

32 

53.37 

70.08 

91.86 

120.19 

156.90 

33 

56.57 

74.99 

99.21 

131.01 

172.68 

34 

59.86 

80.24 

107.15 

142.80 

189.95 

35 

63.56 

85.85 

115.72 

155.^5 

208.94 

36 

67.38 

91.86 

12499 

169.66 

229.83 

37 

71.42 

98.29 

134.98 

184.93 

252.80 

38 

75.70 

105.17 

145.77 

201.54 

278.05 

39 

80.25 

112.54 

157.44 

219.72 

305.90 

40 

85.17 

120.41 

170.03 

239.46 

336.49 

41 

90.16 

128.84 

183.63 

260.99 

370.08 

42 

95.57 

137.86 

19832 

284.51 

407.16 

43 

101.31 

147.51 

214.19 

310.14 

447.88 

44 

107.39 

157.84 

231.32 

338.06 

492.63 

45 

113.83 

168.89 

249.83 

368.47 

541.71 

46 

120.66 

180.71 

269.82 

401.59 

596.06 

47 

127.90 

193.36 

291.40 

437.79 

655.67 

48 

135.57 

206.89 

314.71 

477.20 

721  23 

49 

143.71 

221.38 

339.89 

520.14 

793.45 

50 

178 


TABLE 

Showing  how  much  $|.OO  per  annum 

annually  for  16 


YEARS 

Percent. 

Per  cent. 

Perln, 

Per  cent. 

5 

Per  cent. 

Col.  i. 

Col.  y. 

Col.  3. 

Col.  4. 

Col.  5. 

16 

19.73 

2067 

21.66 

22.70 

23.79 

17 

20.32 

21.39 

22.52 

23.71 

24.98 

18 

20.93 

22.14 

23.  4d 

24.79 

26.23 

19 

21.56 

22.92 

24.36 

25.90 

27.54 

20 

22.21 

23.72 

25.34 

27,07 

28.72 

21 

22.88 

24.55 

26.35 

28.29 

30.36 

22 

23.56 

25.41 

27.40 

2955 

31.88 

23 

24.27 

26.30 

28.50 

30.89 

33.48 

24 

25.00 

27.27 

29.64 

32.28 

35.  15 

25 

25.74 

28.16 

30.82 

33.73 

36.91 

26 

26.52 

29.06 

32.06 

35.25 

38.75 

27 

27.31 

30.  18 

33.34 

36.83 

40.69 

28 

28.13 

31.23 

34.67 

38.50 

42.72 

29 

28.98 

32.33 

36.06 

40.22 

44.87 

30 

2985. 

33.46 

37.50 

42.03 

47.11 

31 

30.74 

34.63 

39.00 

43.93 

49.46 

32 

31.66 

35.84 

40.56 

45.90 

51.1(8 

33 

32.61 

37.10 

42.19 

47.97 

54.53 

34 

33.59 

38.39 

43.87 

50.12 

57.26 

35 

34.60 

39.74 

45.63 

52.39 

60.12 

36 

35.64 

41.13 

4745 

54.73 

63.12 

37 

36.71 

41.97 

49.35 

57.20 

66.28 

38 

37.81 

44.06 

51.33 

59.78 

69.59 

39 

38.94 

45  60 

53.38 

62.47 

73.07 

40 

40.11 

47.20 

55.51 

65.28 

76.73 

41 

41.31 

4805 

57.74 

68.21 

80.56 

42 

42.55 

50.56 

60.05 

71.29 

84.59 

43 

43.83 

52.33 

62.45 

74.50 

88.82 

44 

45.  15 

54.16 

64.95 

77.84 

93.36 

45 

46.50 

56.05 

67.54 

81.34 

97.92 

46 

47.89 

58.02 

70.24 

85.00 

102.82 

47 

49.33 

60.05 

73.05 

88.80 

107.96 

48 

50.81 

62.14 

75.98 

92.82 

113.36 

49 

52.34 

64.32 

79.01 

97.00 

119.03 

50 

53.90 

68.58 

82.18 

101.38 

124.98 

No.  8. 

for  (5  years  will  amount  to,  compounded 
to  5O  years. 


179 


6 

Per  cent. 

Per  cent. 

8 

Per  cent. 

9 

Per  cent. 

n     10 

Per  cent. 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col  9. 

Col.  10. 

26.15 

28.77 

31.67 

34.88 

38.44 

16 

27.72 

30.78 

34.20 

38.0'2 

42.29 

17 

29.39 

34.94 

37.04 

41.44 

46.52 

18 

31.15 

35.24 

39.90 

45.18 

51.17 

19 

33.02, 

37.71 

43.08 

49.24 

56.27 

20 

35.00 

40.35 

46.53 

5367 

61.92 

21 

37.10 

43.18 

50.26 

58.50 

68.11 

22 

89.32 

46.20 

54.28 

63.77 

74.92 

23 

41.68 

49.43 

58.62 

69.51 

82.41 

24 

44.18 

52.89 

63.31 

75.75 

90.65 

25 

-  46.84 

56.60 

68.37 

82.57 

99.71 

26 

49.65 

60.56 

73.84 

90.02 

109.67 

27 

52.62 

64.79 

79.75 

98.12 

120.65 

28 

55.78 

69.33 

86.13 

106.95 

132.72 

29 

59.13 

74.18 

93.02 

116.57 

145.98 

30 

62.68 

79.38 

100.46 

127.05 

160.59 

31 

66.44 

84.93 

108.50 

138.50 

176.64 

32 

70.42 

90.88 

117.18 

150.96 

194.32 

33 

74.65 

97.24 

126.55 

164.55 

213.74 

34 

79.13 

10405 

136.68 

179.35 

235.11 

35 

83.88 

111.33 

147.61 

195.50 

258.63 

36 

88.91 

119.12 

159.42 

213.10 

284.49 

37 

94.24 

127.46 

172.18 

232.28 

312.94 

38 

99.90 

136.39 

18595 

253.18 

344.24 

39 

10589 

145.93 

200.83 

275  97 

378.67 

40 

112.25 

156.05 

216.89 

300.80 

416.53 

41 

118.98 

167.08 

234.25 

327.88 

458.19 

42 

126.12 

178.77 

252.98 

357.38 

503.98 

43 

133.69 

191.29 

273.22 

389.48 

554.30 

44 

141.71 

20J.68 

295.08 

424.61 

609.84 

45 

150.21 

219.01 

31869 

462.77 

670.68 

46 

159.22 

234.34 

344.18 

504.37 

737.79 

47 

168.77 

250.74 

371.71 

549.82 

811.71 

48 

178.90 

268.29 

401.45 

599.36 

892.88 

49 

189.64 

287.07 

433.57 

653.32 

982.09 

50 

180 


TABLE 

Showing  how  much  Sl.OO  per  annum 

annually  for  21 


YEARS. 

3 

Per  cent. 

3^ 

Per  cent. 

4 

Per  cent. 

4^ 
Per  cent. 

5 

Per  cent. 

Col.  i. 

Col.  *. 

Col.  3. 

Col.   4. 

Col    5 

21 

28.51 

30.29 

32.21 

34.26 

36.46 

22 

29.36 

31.35 

33.50 

35.80 

38.28 

23 

30.24 

32.45 

34.84 

37.41 

40.19 

24 

31.15 

33.59 

36.23 

39.09 

42.20 

25 

32.09 

34.76 

37.68 

40.85 

44.31 

26 

33.05 

35.99 

39.18 

42,69 

46.53 

27 

34.04 

37.24 

40.75 

44.61 

48.85 

28 

35.06 

38.54 

42.38 

46.62 

51.30 

29 

36.11 

39.89 

44.08 

48.72 

53.86 

30 

37.19 

41.29 

45.84 

50.91 

56.55 

'31 

38.31 

42.73 

47.68 

53.20 

59.38 

32 

39.46 

44.23 

49.58 

55.60 

62.35 

33 

40.64 

45.78 

51.56 

5S.10 

65.47 

34 

41.86 

47.38 

53.63 

60.71 

68.74 

35 

43.12 

49.04 

55.77 

63.45 

72.18 

36 

44.41 

50.75 

58.01 

66.30 

75.79 

37 

45.74 

52.53 

60.32 

69.28 

79.58 

38 

47.12 

54.37 

63.67 

72.40 

8356 

39 

48.53 

56.27 

65.25 

75.66 

87.74 

40 

49.99 

58.24 

67.86 

79.06 

92.12 

41 

51.49 

60.28 

70.57 

82.62 

96.73 

42 

53.03 

62.39 

73.39 

86.34 

101.55 

43 

55.02 

64.57 

76.33 

90.23 

106.64 

44 

56.26 

66.83 

79.38 

94.28 

111.97 

45 

57.95 

69.17 

82.56 

98.53 

117.57 

46 

59.69 

71.59 

85.86 

102.96 

123.45 

47 

61.48 

74.10 

89.30 

107.49 

129.62 

48 

6332 

76.69 

92.88 

112.44 

136.10 

49 

65.22 

79.38 

96.58 

117.49 

142.91 

50 

67.18 

82.15 

100.45 

122.78 

150.05 

No.  9. 

for  2O  years  will  amount  to,  compounded 
to  5O  years. 


181 


P  6 

7 

8 

Percent 

IO 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9. 

Col.  10 

41.33 

46.94 

53.38 

60.78 

69.30 

21 

43.81 

50.22 

57.65 

66.25 

76.23 

22 

46.44 

53.73 

62.26 

72.22 

83.86 

23 

49.23 

57.50 

67.24 

78.72 

92.24 

24 

52.18 

61.53 

72.62 

85.80 

101.47 

25 

55.31 

65.83 

78.43 

93.52 

111.62 

26 

58.63 

70.44 

84.70 

101.94 

122.77 

27 

62.15 

75.37 

91.48 

111.08 

135.05 

28 

65.88 

80.65 

98.80 

121.11 

148.55 

29 

69.83 

86.29 

106.70 

131.99 

163.41 

30 

74.02 

92.33 

115.13 

143.87 

179.75 

31 

78.46 

98.79 

124.45 

156.85 

197.70 

32 

83.17 

105.71 

134.41 

170.96 

217.48 

33 

88.16 

113.11 

145.16 

186.35 

239.25 

34 

93.45 

120.62 

156.78 

203.12 

263.16 

35 

99.05 

129.50 

169.32 

221.39 

289.50 

36 

104.99 

13856 

18286 

241.33 

318.45 

37 

111.30 

148.26 

197.49 

263.04 

350.29 

38 

117.98 

159.55 

213.29 

286.72 

385.32 

39 

125.05 

169.75 

230.36 

312.50 

423.85 

40 

132.56 

181.63 

248.79 

340.65 

466.22 

41 

140.51 

194.34 

268.69 

371.31 

512.84 

42 

148.94 

207.94 

290.19 

404.73 

564.12 

43 

157.88 

222.50 

313.40 

441.16 

620.56 

44 

L67.35 

238.07 

838.47 

480.86 

682.61 

45 

L77.39 

254.74 

365.55 

524.13 

750.86 

46 

188.03 

272.57 

394.80 

571.31 

825.96 

47 

199.32 

291.65 

426.38 

622.72 

908.50 

48 

211.28 

312.07 

460.49 

678.76 

999.41 

49 

223.95 

333.92 

497.33 

739.87 

1099.36 

50 

TABLE 

Showing  the  present  value  of  Sl.OO  due 

5O,  in 


YEARS 

Q  3 

Per  cent. 

31A 

Per  cent. 

4 

Per  cent. 

4M 

Per  cent. 

5 

Per  cent. 

Col.  i. 

Col.  *. 

Col.  3. 

Col.  4. 

Col.  5. 

1 

.9709 

.9662 

.9615 

.9569 

.9524 

2 

.9426 

.9335 

.9246 

.9157 

.9070 

3 

.9151 

.9019 

.8890 

.8763 

.8638 

4 

.8885 

.8714 

.8548 

.8386 

.8227 

5 

.8626 

.8420 

.8219 

.8025 

.7835 

6 

.8375 

.8135 

.7903 

.7679 

.7462 

7 

.8131 

.7860 

.7599 

.7348 

.7107 

8 

.7894 

.7594 

.7307 

7032 

.6768 

9 

.7664 

.7337 

.7026 

.6729 

.6440 

10 

.7441 

.7089 

.6756 

.6439 

.6139 

11 

.7224 

.6849 

.6496 

.6162 

.5847 

12 

.7014 

.6618 

.6246 

.5897 

.5568 

13 

.6810 

.6394 

.6006 

.5643 

.5303 

14 

.6611 

.6178 

.5775 

5400 

.5051 

15 

.6419 

.5969 

.5553 

.5167 

.4810 

16 

.6232 

.5767 

.5339 

.4945 

.4581 

17 

.6050 

.5572 

.5134 

.4732 

.4363 

18 

.5874 

.5384 

.4936 

.4528 

.4155 

19 

.5703 

.5202 

,4746 

.4333 

.3957 

20 

.5537 

.5026 

.4564 

.4146 

.3769 

21 

.5375 

.4856 

.4388 

.3968 

.3589 

22 

.5219 

.4692 

.4220 

.3797 

.3419 

23 

.5067 

.4533 

.4057 

.3634 

.3256 

24 

.4919 

.4380 

.3901 

.3477 

.3101 

25 

.4776 

.4231 

.3751 

.3327 

.2953 

26 

.4637 

.4088 

.3607      3184 

.2812 

27 

.4502 

.3950 

.3468 

.3047 

.2678 

28 

4371 

.3817 

.3335 

.2916 

.2551 

29 

.4243 

.3687 

.3206 

.2790 

.2429 

30 

.4120 

.3563 

.3083 

.2670 

.2314 

31 

.'1000 

.3442 

.2965 

.2555 

.2204 

32 

.3883 

.3326 

.2851 

.2445 

.2099 

33 

.3770 

.3213 

.2741 

.2340 

.1999 

34 

.3660 

.3105 

.2636 

2239 

.1904 

35 

.3554 

.3000 

.2534 

.2143 

.1813 

36 

.3450 

.2898 

.2437 

.2050 

.1727 

37 

.3350 

.2800 

.2343 

.1962 

.1644 

38 

.3252 

.2706 

.2253 

.1878 

.1566 

39 

.3158 

.2614 

.2166 

.1797 

.1491 

40 

.3066 

.2526 

.2083 

.1719 

.1420 

41 

.2976 

.2440 

.2003 

.1645 

.1353 

42 

.2890 

.2358 

.1926 

.1574 

.1288 

43 

.2805 

.2278 

.  1852 

.1507 

.1227 

44 

.2724 

.2201 

.1780 

.1442 

.1169 

45 

.2644 

.2127 

.1712 

.1380 

.1113 

46 

.2567 

.2055 

.1646 

.1320 

.1060 

47 

.2493 

.1985 

.1583 

.1263 

.1009 

48 

.2420 

.1918 

.1522 

.1209 

.0961 

49 

.2350 

.1853 

.1463 

.1157 

.0916 

50 

.2281 

.1791 

.1407 

.1107 

.0872 

No.  10. 

in  any  number  of  years,  from   I   to 
elusive. 


183 


,  6 

p  7 

8 

Per9cen, 

10 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9. 

Col.  10. 

.9434 

.9346 

.9259 

.9174 

.9091 

1 

.8900 

.8734 

.8573 

.8417 

.8264 

2 

.8396 

.8163 

.7938 

.7722 

.7513 

3 

.7921 

.7629 

.7350 

.7084 

.6830 

4 

.7473 

.7130 

.6806 

.6499 

.6209 

5 

.7050 

.6663 

.6302 

.5963 

.5645 

6 

.6651 

.6228 

.5835 

.5470 

.5132 

7 

.6274 

.5820 

.5403 

.5019 

.4665 

8 

.5919 

.5439 

.5002 

.4604 

.4241 

9 

.5584 

.5083 

.4632 

.4224 

.3855 

10 

.5268 

.4751 

.4289 

.3875 

.3505 

11 

.4970 

.4440 

.3971 

.3555 

.3186 

12 

.4688 

.4150 

.3678 

.3262 

.2897 

13 

4423 

.3878 

.3405 

.2992 

.2633 

14 

.4173 

.3624 

.3152 

.2745 

.2394 

15 

.3936 

.3387 

.2919 

.2519 

.2176 

16 

.3714 

.3166 

.2703 

.2311 

.1978 

17 

.3503 

.2959 

.2502 

.2120 

.1799 

18 

.3305 

.2765 

.2317 

.1945 

.1635 

19 

.3118 

.2584 

.2145 

.1784 

.1486 

20 

.2942 

.2415 

.1987 

.1637 

.1351 

21 

.2775 

•  2257 

.1839 

.1502 

.1228 

22 

.2618 

.2109 

1703 

.1378 

.1117 

23 

.2470 

.1971 

.1577 

.1264 

.1015 

24 

.2330 

.1842 

.1460 

.1160 

.0923 

25 

.2198 

.1722 

.1352 

.1064 

.0  39 

26 

.2074 

.1.609 

.1252 

.0976 

.0763 

27 

.1956 

.1504 

.1159 

.0895 

.0693 

28 

.1846 

.1406 

.1073 

.0822 

.0630 

29 

.1741 

.1314 

.0994 

.0754 

.0573 

30 

.1643 

.1228 

.0920 

.0691 

.0521 

31 

.1550 

.1147 

.0852 

.0634 

.0474 

32 

.1462 

.1072 

.0789 

.0582 

.0431 

33 

.1379 

.1002 

.0730 

.0534 

.0391 

34 

.1301 

.0937 

.0676 

.0490 

.0356 

35 

.1227 

.0875 

.0626 

.0449 

.0323 

36 

.1158 

.0818 

.0580 

.0412 

.0294 

37 

.1092 

.0765 

.0537 

.0378 

.0267 

38 

.1031 

.0715 

.0497 

.0347 

.0244 

39 

.0972 

.0668 

.0460 

.0318 

.0221 

40 

.0917 

.0624 

.0426 

.0292 

.0201 

41 

.0865 

.0583 

.0395 

.0268 

.0183 

42 

.0816 

.0545 

.0365 

.0246 

.0166 

43 

0770 

.0509 

.0338 

.0226 

.0151 

44 

.0727 

.0476 

.0313 

.0207 

.0137 

45 

.0685 

.0445 

.0290 

.0190 

.0125 

46 

.0647 

.0416 

.0266 

.0174 

.0113 

47 

.0610 

.0389 

.0249 

.0160 

.0103 

48 

.0575 

.0363 

.0230 

.0147 

.0094 

49 

.0543 

.0339 

.0213 

.0134 

.0085 

50 

184 


TABLE 

Showing  the  present  value  of  $I.OO  per 

from  |  to 


YEARS 

Per  cent. 

31A 

Per  cent. 

4 

Per  cent. 

4M 

Per  cent. 

Per  cent. 

Col.  i. 

Col.  y. 

Col  3. 

Col.  4. 

Col.  5. 

1 

.9709 

.9662 

0.9615 

0.9569 

0.9524 

2 

1.9135 

1.8997 

1.8861 

1.8727 

1.8594 

3 

28286 

2.8016 

2.7751 

2.7490 

2.7232 

4 

3.7171 

3.6731 

3.6299 

3.5875 

3.5460 

5 

4.5797 

4.5351 

4.4518 

4.3900 

4.3295 

6 

5.4172 

5.3286 

5.2421 

5.1579 

5.0757 

7 

6.2303 

6.1145 

6.0021 

5.8927 

5.7864 

8 

7.0197 

6.8740 

6.7327 

6.5959 

6.4632 

9 

7.7861 

7.6077 

7.4353 

7.2688 

7.1078 

10 

8.5302 

8.3166 

8.1109 

7.9127 

7.7217 

11 

9.2526 

9.0016 

8.7605 

8.5289 

8.3064 

12 

9.9540 

9.6633 

9.3851 

9.1186 

8.8633 

13 

10.6350 

10.3027 

9.9856 

96829 

9.3936 

14 

11.2961 

10.9205 

10.5631' 

102228 

9.8986 

15 

11.9379 

11.5174 

11.1184 

10.7395 

10.3797 

16 

12.5611 

12.0941 

11.6523 

11.2340 

108378 

17 

13.1661 

12.6513 

12.1657 

11.7072 

11.2741 

18 

13.7535 

13.1897 

12.6593 

12.1600 

11.6896 

19 

14.3238 

13.7098 

13.1339 

12.5933 

12.0853 

20 

11.8775 

14.2121 

13.5903 

13.0079 

12.4622 

21 

15.4150 

14.6980 

14.0292 

13.4047 

12.8212 

22 

15.9369 

15.1671 

14.4511 

13.7844 

13.6030 

23 

16.4436 

15.6204 

14.8568 

14.1478 

12.4886 

24 

16.9355 

16.0584 

15.2470 

14.4955 

13.7986 

25 

17.4131 

16.4815 

15.6221 

14.8282 

14.0939 

26 

17.8768 

16  8904 

15.9828 

15.1466 

14.3752 

27 

18.3270 

17.2854 

16.3296 

15.4513 

14.6430 

28 

18.7641 

17.6670 

16.6631 

15.7429 

14.8981 

29 

19.1885 

18.0358 

16.9837 

16.0219 

15.1411 

30 

19.6004 

18.3920 

17.2920 

16  2889 

15  3725 

31 

20.0004 

18.7363 

17.5885 

16.5444 

15.5928 

32 

20.3888 

19.0689 

17.8736 

16.7889 

15.8027 

33 

20.7658 

19.3902 

18.1476 

17.0229 

16.0025 

34 

21  1318 

19.7007 

18.4112 

17.2468 

16.1929 

35 

21.4872 

20.0007 

18.6646 

17.4610 

16.3742 

36 

21.8323 

20.2905 

18.9083 

17.6660 

16.5469 

37 

22.1672 

20.5705 

19.1426 

17.8622 

16.7113 

38 

22.4925 

20.8411 

19.3679 

18.0500 

16.8679 

39 

22.8082 

21.1025 

19.5845 

18.2297 

17.0170 

40 

23.1H8 

21.3551 

19.7928 

18.4016 

17.1591 

41 

23.4124 

21.5991 

19.9931 

18.5661 

17.2944 

42 

23.7014 

21.8349 

20.1856 

18.7235 

17.4232 

43 

23.9819 

22.0627 

20.3708 

18.8742 

17.5459 

44 

24.2543 

22.2828 

20.5488 

19.0184 

17.6628 

45 

24.5187 

22.4955 

20.7200 

19.1563 

17.7741 

46 

24.7754 

22.7009 

20.8847 

19.2884 

17.8801 

47 

25.0247 

22.8994 

21.0429 

19.4147 

17.9801 

48 

25.2667 

23.0912 

21.1951 

19.5356 

18.0772 

49 

25.5017 

23.2766 

21.3415 

19.6513 

18.1687 

50 

25.7298 

23.4556 

21.4852 

19.7620 

18.2559 

No.  II. 

annum    due   in 
5O,  inclusive. 


185 


any   number    of  years, 


P  6 

Parpen 

PeSen, 

Per9cen, 

Percent 

y 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9. 

Col.  10. 

0.9434 

0.9346 

0.9259 

0.9174 

0.9091 

1 

1.8334 

1.8080 

1.7833 

1.7591 

1.7355 

2 

2.6730 

2.6243 

2.5771 

2.5313 

2.6849 

3 

3.4651 

2.3872 

3.3121 

3.2397 

3.1699 

4 

4.2124 

4.1002 

3.9927 

3.8897 

3.7908 

5 

4.9173 

4.7665 

4.6229 

4.4859 

4.3543 

6 

5.5824 

5.3893 

5.2064 

50330 

48684 

7 

6.2098 

5.9713 

5.7466 

5.5348 

5.3349 

8 

6.8017 

6.5152 

6.2469 

5.9952 

5.7590 

9 

7.3601 

7.0236 

6.7101 

6.4177 

6,1446 

10 

7.8869 

7.4987 

7.1390 

68052 

6.4951 

11 

8.3838 

7.9427 

7.5361 

7  1607 

6.8137 

12 

88527 

8.3577 

7.9038 

7.4869 

•  7.1034 

13 

9.2950 

8.7455 

8.2442 

7.7861 

7.3677 

14 

97122 

9.1079 

8.5595 

8.0607 

7.6061 

15 

10.1059 

9.4466 

8.8514 

8.3125 

7.8237 

16 

10.4773 

9.7632 

9.1216 

8.5436 

8.0216 

17 

10.8276 

10.0591 

9.3719 

8.7556 

8.2014 

18 

11.1501 

10.3356 

9.6036 

8.9501 

8.3649 

19 

1  1.4699 

10.5940 

9.8181 

9.1285 

8.5136 

20 

11.7641 

10.8355 

10.0168 

9.2922 

8.6487 

21 

12.0416 

11.0612 

10.2007 

9.4124 

8.7715 

22 

12.3034 

11.2722 

10.3711 

9.5802 

8.8832 

23 

12.5504 

11.4693 

10.5288 

9-7066 

8.9847 

24 

12.7834 

11.6536 

10.6748 

9.8226 

9.0770 

25 

13.0032 

11.8258 

10.8100 

9.9290 

9.1609 

26 

13.2105 

11.9867 

10.9352 

10.0266 

9.2372 

27 

13.4062 

12.1371 

11  0511 

10.1161 

9.3066 

28 

13.5907 

12.2777 

11.1584 

10.1983 

9.3696 

29 

13.7648 

12.4090 

11.2578 

10.2736 

94269 

30 

13.9291 

12.5318 

11.3498 

10.3428 

9.4790 

31 

14.0840 

12.6466 

11.4350 

10.4062 

9.5264 

32 

14.2302 

12.7538 

11.5139 

10.4644 

9.5694 

33 

14.3681 

12.8540 

11.5869 

10.5178 

9.6086 

34 

14.4982 

12.9477 

11.6546 

10.5668 

9.6442 

35 

14.6210 

13.0352 

11.7172 

10.6117 

9.6765 

36 

14.7368 

13.1170 

11.7752 

10.6530 

9.7059 

37 

14.8460 

13.1935 

11.8289 

10.6908 

9.7327 

38 

14.9491 

13.2649 

11.8786 

10.7255 

9.7570 

39 

15.0463 

13.3317 

11.9246 

10.7573 

9.7791 

40 

15.1380 

13.3941 

11.9672 

10.7866 

9.7991 

41 

15.2245 

13.4524 

12.0067 

10.81-34 

9.8174 

42 

15.3062 

13.5070 

12.0432 

10.8379 

9.8340 

43 

15.3832 

13.5579 

12.0771 

10.8605 

98491 

44 

15.4558 

13.6055 

12.1084 

10.8812 

9.8628 

45 

15.5244 

13.6500 

12.1374 

10.9002 

9.8753 

46 

15.5890 

13.6916 

12.1643 

10.9176 

9.8866 

47 

15.6500 

13.7305 

12.1891 

10.9336 

9.8969 

48 

15.7076 

13.7668 

12.2122 

10.9482 

9.9063 

49 

15.7619 

13.8007 

12.2335 

10.9617 

9.9148 

50 

186 


TABLE 

Showing  how  much  money  must  be  invested 

I  to  5O  years,  to 


YEARS. 

Per  cent. 

31/* 
Per  cent. 

Pertn, 

41/* 

Per  cent. 

Pe^n, 

Col.  i. 

Col.  2. 

Col.  3. 

Col.  4. 

Col.  5- 

1 

970.90 

966.20 

961.54 

956.95 

952.38 

2 

478.26 

474.79 

471.34 

467.95 

464.58 

3 

314.11 

311.05 

308.02 

305.05 

302.11 

4 

232.07 

229.23 

226.43 

223.68 

220.97 

5 

182.87 

180.01 

177.53 

174.94 

172.36 

6 

150.10 

147.50 

144.96 

142.47 

140.02 

7 

126.70 

124.19 

121.74 

119.33 

116.97 

8 

109.18 

J06.74 

104.35 

102.02 

99.73 

9 

95.57 

93.18 

90.86 

88.59 

86.37 

10 

84.69 

82.36 

80.09 

77.88 

75.72 

11 

75.80 

73.52 

71.30 

69.14 

67.04 

12 

6841 

66.18 

63.99 

61.88 

59.83 

13 

62.16 

59.96 

57.83 

55.77 

53.77 

14 

56.82 

54.66 

52.57 

50.55 

48.59 

15 

52.20 

50.07 

48.02 

4604 

44.14 

16 

48.16 

46.07 

44.06 

42.12 

40.26 

17 

4461 

4256 

40.58 

38.68 

36.86 

18 

41.47 

39.44 

37.50 

35.63 

33.85 

19 

38.66 

3691 

34.75 

3293 

31.19 

20 

36.13 

34.17 

32.29 

30.50 

28.80 

21 

33.86 

31.92 

30.08 

28.33 

26.66 

22 

31.71 

29.89 

28.08 

26.36 

24.73 

23 

29.91 

28.04 

26.26 

24.58 

22.99 

24 

28.20 

26.35 

24.60 

22.95 

21.40 

25 

26.63 

24.81 

23.09 

21.47 

19.96 

26 

25.18 

24.38 

21.70 

20.12 

18.63 

27 

23.85 

22.08 

20:42 

18.87 

17.42 

28 

22.62 

20.87 

19.24 

17.72 

16.31 

29 

21.48 

19.75 

18.16 

16.67 

15.28 

30 

20.41 

18.72 

17.14 

15.69 

14.34 

31 

19.42 

18.07 

1621 

14.78 

13.46 

32 

18.49 

16.85 

15.34 

13.94 

12.65 

33 

17.63 

16.01 

14.52 

13.16 

11.90 

34 

16.82 

15.23 

,4       13.76 

12.42 

11.20 

35 

16.06 

14.49 

13.06 

11.74 

10.55 

36 

15.34 

13.80 

12.39 

11.11 

9.94 

37 

14.67 

13.15 

11.77 

10.51 

9.37 

38 

14.04 

12.54 

11.19 

996 

8.84 

39 

13.44 

11.97 

10.64 

9.43 

8.35 

40 

12.88 

11.43 

10.12 

8.94 

7.88 

41 

12.34 

10.92 

9.63 

8.48 

7.45 

42 

11.84 

10.43 

9.17 

8.04 

7.04 

43 

11.36 

9.  98 

8.74 

7.64 

6.66 

44 

10.90 

9.54 

8.33 

7.25 

6.30 

45 

10.50 

9.13 

7.94 

6.89 

5.97 

46 

10.06 

8.75 

7.58 

6.55 

5.65 

47 

9.67 

8.38 

7.23 

6.23 

5.35 

48 

9.30 

8.03 

6.91 

5.92 

5.06 

49 

8.94 

7.69 

6.59 

5.63 

4.80 

50 

8.61 

7.38 

6.30 

5.36 

4.55 

187 


NO.   12. 

every  year,  and  compounded  annually  for 
amount  to  $I,OOO. 


6 

Per  cent. 

PerL, 

.    Pe  «en, 

Percent. 

10 

Per  cent. 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9. 

Col.  10. 

943.40 

934.58 

925.93 

917.43 

909.09 

1 

457.96 

451.49 

445.16 

438.96 

432.90 

2 

296.33 

290.71 

285.22 

279.87' 

274.65 

3 

215.65 

210.50 

205.48 

200.61 

195.88 

4 

167.35 

162.51 

157.83 

153.30 

148.91 

5 

135.25 

130.65 

126.22 

121.95 

117.83 

6 

112.39 

107.99 

103.77 

99.72 

95.82 

7 

95.32 

91.09 

87.05 

83.19 

79.49 

8 

8-3.10 

78.03 

74.14 

70.46 

66.95 

9 

71.57 

67.64 

63.92 

60.39 

56.91 

10 

63.01 

59.21 

55.63 

52.25 

49.06 

11 

55.92 

52.24 

48.79 

45.55 

42.51 

12 

49.96 

46.40 

43.08 

39.97 

37.07 

13 

44,89 

41.44 

38.24 

35.26 

32.50 

i4 

40.53 

37.19 

34.10 

31.25 

28.61 

15 

36.75 

33.51 

30.53 

27.80 

25.29 

16 

33.44 

30.30 

27.44 

24.81 

.   22.42 

17 

30.53 

27.49 

24.72 

22.21- 

19.94 

18 

27.94 

25.00 

22.34 

19.94 

17.77 

19 

25.65 

22.80 

20.23 

17.93 

15.87 

20 

23.59 

20.83 

18.36 

16.16 

14.20 

21 

21.74 

19.07 

16.70 

14.59 

12.73 

22 

20.07 

17.49 

15.21 

13.19 

11.43 

23 

18.57 

16.06 

13.87 

11.95 

10.27 

24 

17.20 

14.78 

12.67 

10.83 

9.24 

25 

15.95 

13.61 

11.58 

9.83 

8.33 

26 

14.81 

12.55 

10.60 

8.93 

7.51 

27 

13.77 

11.58 

9.71 

8.12 

6.77 

28 

12.81 

10.70 

8.91 

7.39 

6.12 

29 

11.93 

9.89 

8.17 

6.73 

5.53. 

30 

11.12 

9.15 

7.51 

6.13 

5.00 

31 

10.38 

8.48 

6.90 

5.59 

4.52 

32 

9.69 

7.86 

6.34 

5.10 

4.09 

33 

9.05 

7.29 

5.84 

4.66 

3.70 

34 

8.47 

6.76 

5.37 

4.25 

3.35 

35 

7.92 

6.28 

4.95 

3.89 

3.04 

36 

7.41 

5.83 

4.56 

3.55 

2.75 

37 

6.74 

5.42 

4.21 

3.25 

2.50 

38 

8.  5  \ 

5.03 

3.87 

2.97 

2.26 

39 

6.10 

4.68 

3.57 

2.72 

2.05 

40 

5.72 

4.35 

3.30 

2.48 

1.86 

41 

5.36 

4.05 

3.04 

2.27 

1.69 

42 

5.03 

3.77 

2.81 

2.08 

1.53 

43 

4.72 

3.51 

2.59 

1.91 

1.39 

44 

4.43 

3.27 

2.40 

1.74 

1.26 

45 

4.17 

3.05 

2.21 

1.60 

1.15 

46 

3.92 

2.84 

2.04 

1.46 

1.04 

47 

3.68 

2.65 

.1.89 

1.34 

.95 

48 

3.46 

2.47 

1.75 

1.23 

.86 

49 

3.25 

2.30 

161 

1.13 

.78 

50 

188 


TABLE 

Showing  how  much  money  must  be  invested 
nually,  to  amount  to  $I,OOO 


YEARS. 

Per?ent 

31A 

Per  lent 

4^ 

Per  cent. 

5 

* 

Col.  i. 

Col.  *. 

Coi.  3. 

Col.   4. 

Col    5. 

11 

$82.22 

$79.57 

$77.01 

$74.52 

$72.11 

12 

79.83 

76.88 

74.05 

71.31 

68.68 

13 

77.51 

74.29 

71.20 

68.24 

65.41 

14 

75.24 

71  77 

68.46 

65.30 

62.29 

15 

73.06 

69.34 

6582 

62.49 

59.33 

16 

7092 

67.00 

63.30 

59.80 

56.50 

17 

68.86 

64.73 

60.86 

57.22 

53.81 

18 

66.85 

62.58 

58.52 

54.76 

51.25 

19 

64.91 

60.43 

56.27 

52.40 

49.81 

20 

63.02 

58.39 

54.11 

50.14 

46.49 

21 

61.18 

56.41 

52.02 

47.99 

44.27 

22 

59.39 

54.50 

50.02 

45.92 

42.16 

23 

57.67 

52.65 

48  10 

43.94 

40.16 

24 

55.99 

50.98 

46.25 

42.05 

38.24 

25 

54.35 

49.16 

44.47 

40.24 

36.42 

26 

52.78 

47.50 

42.76 

38.51 

34.69 

27 

51.24 

45.89 

41.12 

36.85 

33.04 

28 

49.75 

44.34 

39.53 

35.26 

31.46 

29 

48.29 

42.84 

38.01 

33.74 

29.96 

30 

4693 

41.39 

36.55 

32.29 

28.54 

81 

45.52 

40.00 

35.14 

30.90 

27.18 

32 

44.20 

38.65 

33.79 

29.58 

25.88 

33 

42.91 

37.34 

32.49 

28.30 

24.67 

34 

41.07 

36.07 

31.25 

27.08 

2344 

35 

40.40 

34.85 

30.04 

25.91 

22.34 

36 

39.23 

33.67 

28.89 

24.79 

21.30 

37 

38.13 

32.53 

27.78 

23.73 

20.30 

38 

37.00 

31.41 

26.71 

22.71 

19.32 

39 

35.94 

30.36 

25.68 

21.73 

18.40 

40 

34.90 

29.34 

24.69 

20.79 

17.53 

41 

33.87 

28.35 

23.74 

19.90 

16.69 

42 

32.90 

27.40 

22.83 

19.04 

15.90 

43 

31.93 

26.47 

21.95 

18.22 

15.13 

44 

31.00 

25.57 

21.11 

17.44 

14.42 

45 

30.10 

24.71 

20.30 

16.68 

13.73 

46 

29.22 

23.87 

19.52 

15.97 

13.08 

47 

28.37 

23.06 

18.77 

15.30 

12.45 

48 

27.55 

22.29 

1804 

14.62 

11.86 

49 

26.75 

21.53 

17.35 

14.00 

11.29 

50 

25.97 

20.80 

16.68 

13.40 

10.75 

189 


No.  13. 

every  year,  for  10  years,  and  compounded,  an- 
in  ||  to  5O  years. 


6 

Per   cent. 

Per  cent. 

B  8 

Per  cent. 

9 

Per  cent. 

10 

Per  cent. 

YEARS. 

Col.  6. 

Col.  7- 

Col.  8. 

Col.  9. 

Col.  10. 

$67.52 

$63.22 

$59.18 

$55.40 

$51.86 

11 

63.71 

59.08 

54.80 

50.83 

47.14 

12 

60.00 

55.22 

50.74 

46.63 

42.86 

13 

56.69 

51.60 

46.98 

42.78 

38.96 

14 

53.49 

48.23 

43.50 

39.25 

35.42 

15 

50.46 

45.07 

40.28 

36.01 

32.20 

16 

47.60 

42.12 

37.30 

33.03 

29.27 

17 

44.91 

39.40 

34.53 

30.31 

26.60 

18 

42,36 

36.79 

31.97 

27.80 

24.19 

19 

39.97 

34.  3  9 

29.61 

25.51 

21.99 

20 

37.70 

32.14 

27.41 

22.87 

19.99 

21 

35.57 

30.03 

25.38 

21.47 

18.18 

22 

33.56 

28.07 

23.50 

19.71 

16.52 

23 

31.66 

26.23 

21.76 

18.07 

15.20 

24 

29.86 

24.52 

20.15 

16.58 

13.66 

25 

28.17 

22.91 

18.66 

15.21 

12.41 

26 

26.58 

21.41 

1727 

13.95 

11.29 

27 

25.08 

20.01 

16.00 

12.80 

10.26 

28 

23.66 

18.70 

14.81 

11.74 

9.33 

29 

22.32 

17.48 

13.71 

10.78 

8.48 

30 

21.05 

16.34 

12.71 

9.89 

7.71 

31 

19.88 

15.27 

11.75 

9.07 

7.01 

32 

18.84 

14.27 

10.89 

8.32 

6.37 

33 

17.67 

13.33 

10.08 

7.63 

5.79 

34 

16.68 

12.46 

9.33 

7.00 

5.27 

35 

15.73 

11.64 

8.64 

6.43 

4.79 

36 

14.85 

10.90 

8.00 

5.90 

4.35 

37 

14.04 

10.17 

7.41 

5.41 

3.95 

38 

13.25 

951 

6.87 

4.96 

3.60 

39 

12.47 

8.90 

6.35 

4.55 

3.29 

40 

11.75 

8.30 

5.88 

4.18 

2.97 

41 

11.10 

7.76 

5.44 

3.83 

2,70 

42 

10.46 

7.26 

5.04 

3.51 

2.45 

43 

9.87 

6.77 

4.67 

3.23 

2.23 

44 

9.31 

6.33 

4.32 

2.96 

2.03 

45 

8.79 

5.92 

4.00 

2.72 

1.85 

46 

8.21 

5.53 

3.71 

2.44 

1.68 

47 

7.82 

5.17 

3.43 

2.29 

1.53 

48 

7.38 

4.83 

3.18 

2.10 

1.39 

49 

6.97 

4.52 

2.94 

1.92 

1.27 

50 

190 


TABLE 

Showing  how  much  money  must  be  invested 
nually,  to  amount  to  $I,OOO 


YEARS. 

3 

Per  cent. 

™3^ 

Per  cent. 

4 

Per  cent. 

4^ 

Per  cent. 

5 

Per  cent. 

Col   i. 

Col.  *. 

Col.  3. 

Col.  4. 

Col.  5. 

16 

$50.67 

$48.38 

$46.17 

44.06 

42.03 

17 

49  21 

46.75 

44.40 

42.15 

40.03 

18 

47.78 

45.15 

42  69 

40.34 

38.16 

19 

46  40 

43  64 

41.05 

38.61 

36.31 

20 

45.05 

42.16 

39.47 

36.95 

34.58 

21 

43.72 

40.73 

37.95 

35.35 

32.93 

22 

42.44 

39.36 

36.49 

3383 

31.37 

23 

41  21 

38.03 

35.09 

32.38 

29.87 

24 

40  01 

36.74 

33.74 

30.98 

28.45 

25 

38.84 

35.50 

32.44 

29.71 

27.10 

26 

37.71 

34.30 

31.19 

28.37 

25.81 

27 

36.61 

33.14 

29.99 

27.15 

24.58 

28 

35.55 

32.02 

28.84 

25.98 

2-U1 

29 

3451 

30.93 

27.73 

24.86 

22  29 

30 

33.51 

29.89 

26.66 

23.79 

21.22 

31 

32.53 

28.88 

25.64 

22.77 

20.22 

32 

31.58 

27.90 

24.65 

21.79 

19.26 

33 

30.66 

26.96 

2370 

20.85 

18.34 

34 

29.77 

26.05 

22.79 

19.95 

17.47 

35 

28.90 

25.17 

21.92 

19.09 

16.63 

36 

28.06 

24.31 

21.07 

18.27 

15.84 

37 

27.25 

23.49 

20.26 

17.48 

15.09 

38 

26.45 

22.70 

19.48 

16.73 

14.37 

39 

25.68 

21.93 

18.73 

16.01 

13.69 

40 

24.93 

21.18 

18.01 

15.32 

13.03 

41 

24.21 

20.47 

17.32 

14.66 

12.41 

42 

23.50 

19.78 

16.65 

14.03 

11.82 

43 

22.82 

19.11 

16.01 

13.42 

11.26 

44 

22.15 

18.46 

15.36 

12.85 

10.72 

45 

21.51 

17.83 

14.81 

12.29 

10.21 

46 

20.88 

17.24 

14.24 

11.76 

9.73 

47 

2027 

16.65 

13.69 

11.26 

9.26 

48 

19.68 

16.09 

13.16 

10.77 

8.82 

49 

1911 

15.55 

12.66 

10.31 

8.40 

50 

18.55 

15.02  . 

12.17 

9.86 

8.00 

No.   14. 

every  year,  for  15  years,  and  compounded,  an- 
in  16  to  5O  years. 


6 

Per  cent. 

Per  cent. 

8 

Per  cent. 

9 

Per  cent. 

10 

Per  cent 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9 

Col.  10. 

$38.24 

134.75 

$31.58 

$28.67 

$26.01 

16 

36.07 

32.48 

29.24 

26.30 

23.65 

17 

34.03 

30.36 

27.07 

24.13 

21.50 

18 

32.10 

28.37 

25.07 

22.14 

19.54 

19 

30.29 

2652 

23.21 

20.31 

17.77 

20 

28.57 

24.78 

21.49              18.63 

16.19 

21 

26.96 

23.16 

19.90              17.09 

14.68 

22 

25  43 

21.65 

1843              15.68 

13.35 

23 

23.99 

*0.23 

17.06              14.41 

12.14 

24 

22.63 

18.91 

1579              13.20 

11.03 

25 

21.35 

17.67 

14.63              12.11 

10.03 

26 

20.14 

16.51 

13.54              11.11 

9.12 

27 

19.00 

15.29 

12.54              10.19 

8.29 

28 

17.93 

1442 

11.61                9.36 

7.54 

29 

16.91 

13.48 

10.75               8.58 

6.85 

30 

15.59 

12.60 

9.96 

7.87 

6.23 

31 

15.05 

11.77 

9.22 

7.22 

5.67 

32 

14.20 

11.00 

8.54 

6.63 

5.15 

33 

1339 

10.29 

7.91 

6.08 

4.68 

34 

12.64 

9.62 

7.32 

5.58 

4.25 

35 

11.25 

8.98 

6.78 

5.12 

3.87 

36 

11.24 

8.39 

6.21 

4.69 

3.52 

37 

10.61 

7.85 

5.81 

4.31 

3.10 

38 

10.01 

7.33 

5.38 

3.95 

2.91 

39 

9.44 

6.85 

4.98 

3.63 

2.65 

40 

8.91 

6.40 

4.62 

3.33 

2.41 

41 

8.40 

5.99 

4.27 

3.05 

2.18 

42 

7.93 

5.59 

3.95 

2.80 

1.99 

43 

7.48 

5.23 

3.66 

2.57 

1.84 

44 

7.05 

4.86 

3.39 

2.36 

1.64 

45 

666 

4.57 

3.14 

2.16 

1,49 

46 

6.29 

4.27 

2.91 

1.98 

1.31 

47 

5.93 

399 

2.69 

1.82 

1.23 

48 

5.59 

3.73 

2.49 

1.67 

1.11 

49 

5.27 

3.49 

2.31 

1.54 

1.01 

50 

192 


TABLE 

Showing  how  much  money  must  be  in 
compounded,  annually,  to  amount 


YEARS. 

3 

Per  cent. 

31/* 

Per  cent. 

4 

Per  cent. 

«  41/2 

Per  cent. 

Per  cent. 

Col.  i. 

Col      2 

Col.  3. 

Col.  4. 

Col.  5. 

21 

$35.08 

$33.01 

$31.05 

$29.19 

$27.43 

22 

34.05 

31.90 

29.85 

27.93 

26,12 

23 

3307 

30.81 

28.71 

26.73 

25.23 

24 

32.10 

29.77 

27.60 

25.58 

23.70 

25 

31.17 

28.77 

26.54 

24.48 

22.57 

26 

30.33 

27.79 

25.52 

23.42 

21.49 

27 

29.38 

26.85 

24.54 

22.42 

20.46 

28 

28.52 

25.95 

23.60 

21.45 

19.50 

29 

27.69 

25,07 

22.69 

20.53 

18.57 

30 

26.89 

24.22 

21.82 

19.64 

17.68 

31 

26.10 

2349 

20.98 

18.80 

16.84 

32 

25.34 

22.51 

20.17 

17.1*9 

16.03 

33 

2460 

21.85 

19.39 

17.21 

15.28 

34 

23.89 

21.11 

18.65 

16.47 

14.55 

35 

23.19 

2040 

17.93 

15.76 

13.86 

36 

22.52 

19.70 

17.24 

15.08 

13.20 

37 

21.86 

19.04 

16.58 

14.43 

12.56 

38 

21.21 

18.39 

15.94 

13.81 

11.99 

39 

20.61 

17.77 

15.33 

13.21 

11.40 

40 

20.01 

17-17 

14.40 

12.64 

10.86 

41 

19.42 

16.59 

14.17 

12.10 

10.34 

42 

18.86 

16.04 

13.63 

11.58 

9.85 

43 

18.31 

15.49 

13.10 

10.09 

9.38 

44 

17.77 

14.96 

12.60 

10.61 

8.93 

45 

17.25 

14.46 

12.11 

10.15 

8.51 

46 

16  75 

13.97 

11.65 

9.71 

8.10 

47 

16.27 

13.50 

11,20 

9.29 

7.72 

48 

15.58 

13.04 

10.74 

8.89 

7.35 

49 

15.33 

12.60 

10.35 

8.51 

7.00 

50 

14.89 

12.17 

9.96 

8.15 

6.66 

No.  15. 

vested,  every   year,  for  2O  years,   and 
to  $I,OOO,  in  21  to  5O  years. 


193 


Percent 

Pe/cent 

PcScnt 

Percent 

YEARS. 

Col.  6. 

Col.  7. 

Col.  8. 

Col.  9. 

Col.  10. 

$24.19 

$21.31 

$18.74 

$16.45 

$14.43 

21 

22.83 

19.91 

17.35 

15.09 

13.12 

22 

21.53 

18.61 

16.06 

13.83 

11.23 

23 

20.31 

17.39 

14.87 

12.71 

10.84 

24 

19.17 

16.25 

13.77 

11.66 

9.86 

25 

18.08 

15.19 

12.75 

10.69 

8.96 

26 

17.06 

14.19 

11.80 

9.81 

8.15 

27 

16.09 

13.26 

10.93 

9.00 

7.42 

28 

15.18 

12.40 

10.12 

8.26 

6.73 

29 

14.32 

11  58 

9  38 

7.57 

6.12 

30 

13.55 

10.83 

8.68 

6.95 

5.56 

31 

12.75 

10.12 

8.04 

6.38 

5.06 

32 

12.02 

9.46 

7.44 

5.85 

4.60 

33 

10.86 

8.84 

6.89 

5.37 

4.18 

34 

10.70 

8  27 

6.38 

4.92 

3.80 

35 

10.09 

7.72 

5.91 

4.52 

3.45 

36 

952 

7.22 

5.47 

4.14 

3.15 

37 

8.99 

6.75 

5.06 

3.80 

2.86 

38 

8.48 

6.30 

4.69 

3.49 

2.60 

39 

800 

5.89 

4.34 

3.20 

2.36 

40 

7.54 

5.51 

4.02 

2.93 

2.15 

41 

7.12 

5.15 

3.72 

2.69 

1.95 

42 

6.72 

4.81 

3.45 

2.48 

1.77 

43 

6.34 

4.50 

3.20 

2.27 

1.61 

44 

5.98 

4.20 

2.96 

2.08 

1.47 

45 

5.64 

3.93 

2.74 

1.91 

1.33 

46 

5.32 

3.67 

2.53 

1.75 

1.21 

47 

5.02 

3.43 

2.35 

1.61 

1.11 

48 

4.73 

3.20 

2.17 

1.47 

1.00 

49 

4.47 

2.99 

2.01 

1.35 

.91 

50 

194 


TABLE     No.  16. 

Actuaries'  Table  of  Mortality. 


AGE. 

Number 
living. 

Deaths 
each  year 

Per  cent,  of 
deaths  to 
the  living. 

Expectation 
of  life. 

NET    PREMIUMS. 
Actuaries'  4  Per  cent. 

Level  Ann. 
Prem.  to  in- 
sure  $1,000 
for  life. 

Natural 
Pr'm.  to  in- 
sure  $1000 
one  year. 

Col.  i. 

Col.  2, 

Col-  3- 

Col.  4. 

Col.  5. 

Col.  6. 

10 

100,000 

676 

.006760 

48.36 

10.43 

6.50 

11 

99,324 

674 

.006786 

47.68 

10.63 

6.53 

12 

98,650 

672 

.006812 

47.01 

10.84 

6.55 

13 

97,978 

671 

.006848 

46.33 

11.07 

6.59 

14 

97,307 

671 

.006896 

45.64 

11.30 

6.63 

15 

96,636 

671 

.006944 

44.96 

11.54 

6.68 

16 

95,965 

672 

.007003' 

44.27 

11.80 

6.73 

17 

95,293 

673 

.007062 

43.58 

12.07 

6.79 

18 

94,620 

675 

.007134 

42.88 

12.35 

6.86 

19 

93,945 

677 

.007206 

42.19 

12.64 

6.93 

20 

93,268 

680 

.007291 

41.49 

12.95 

7.01 

21 

92,588 

683 

.007377 

40.79 

13.27 

7.09 

22 

91,905 

686 

.007464 

40.09 

13.61 

7.18 

23 

91,219 

690 

.007564 

39.39 

13.96 

7.27 

24 

90,529 

694 

.007666 

38.68 

14.33 

7.37 

25 

89,835 

698 

.007770 

37.98 

14.72 

7.47 

26 

89,137 

703 

.007887 

37.27 

15.13 

7.58 

27 

88,434 

708 

.008006 

36.56 

15.56 

7.70 

28 

87,726 

714 

.008139 

35.86 

16.01 

7.83 

29 

87,012 

720 

.008275 

35.15 

16.48 

7.96 

30 

86,292 

727 

.008425 

84.43 

16.97 

8.10 

31 

85,565 

734 

.008578 

33.72 

17.49 

8.25 

32 

84,831 

742 

.008747 

33.01 

18.04 

8.41 

33 

84,089 

750 

.008919 

32.30 

18.62 

8.58 

34 

83,339 

758 

.009095 

31.58 

19.23 

8.75 

35 

82,581 

767 

.009288 

30.87 

19.87 

8.93 

36 

81,814 

776 

.009485 

30.15 

20.54 

9.12 

37 

81,038 

785 

.009687 

29.44 

21.26 

9.31 

38 

80,253 

795 

.009906 

28.72 

22.02 

9.53 

39 

79,458 

805 

.010131 

28.00 

22.82            9.74 

40 

78,653 

815 

.010362 

27.28 

23.68 

9.96 

41 

77,838 

826 

.010612 

26.56 

24.59 

10.20 

42 

77,012 

839 

.010894 

25.84 

25.55 

10.48 

43 

76,173 

857 

.011251 

25.12 

26.59 

10.82 

44 

75,316 

881 

.011697 

24.40 

27.68 

11.25 

45 

74,435 

909 

.012212 

23.69 

28.85 

11.74 

46 

73,526 

944 

.012839 

22.97 

30.08 

12.35 

47 

72,582 

981 

.013517 

22.27 

31.39 

13.00 

48 

71,601 

1,021 

.014260 

21.56 

32.77 

13.71 

49 

70,580 

1,063 

.015061 

20.87 

34.23 

14.48 

50 

69,517 

1,108 

.015939 

20.18 

35.78 

15.33 

51 

68,409 

1,156 

.016898 

19.50 

37.42 

16.25 

52 

67,253 

1,207 

.017Q47 

18.82 

39.15 

17.26 

53 

66,046 

1,261 

.019093 

18.16 

41.00 

18.36 

54 

64,785 

1,316 

.020313 

17.50 

42.95 

19.53 

TABLE      NO.    16.   —CONTINUED. 
Actuaries'  Table  of  Mortality. 


195 


AGE. 

Number 
living. 

Deaths 
each  year. 

Per  cent,  of 
deaths  to 
the  living. 

Expectation 
of  life. 

NET  PREMIUMS. 
Actuaries'  4  Per  cent. 

Level  Ann. 
Prem.  to  in- 
sure   $1,000 

for  life. 

Natural 
Pr'm.  to  in- 
sure $1000 
one  year. 

Col  i. 

Col,  2. 

Col.  3. 

Col.  4. 

Col.  5. 

Col.  6. 

55 

63,469 

1,375 

.021664 

16.86 

$45.03 

$20.83 

56 

62,094 

1,436 

.023126 

16.22 

47.23 

22.24 

57 

60,658 

1,497 

.024679 

15.59 

49.57 

23.73 

58 

59,161 

1,561 

.026386 

14.97 

52.07 

25.37 

59 

57,600 

1,627 

.028247 

14.37 

54.72 

27.16 

60 

55,973 

1,698 

.030336 

13.77 

57.56 

29.17 

61 

54,275 

1,770 

.032612 

13.18 

60.57 

31.36 

62 

52,505 

1,844 

.035120 

12.61 

63.78 

33.77 

63 

50,661 

1,917 

.037840 

12.05 

67.20 

36.38 

64 

48,744 

1,990 

.040826 

11.51 

70  84 

39.26 

65 

46,754 

2,061 

.044082 

10.97 

74.72 

42.39 

66 

44,693 

2,128 

.047614 

10.46 

78.85 

45.78 

67 

42,565 

2,191 

.051474 

9.96 

83.24 

49.49 

68 

40,374 

2,246 

.055630 

9.47 

87.91 

53.49 

69 

38,128 

2,291 

.060087 

9.00 

92.89 

57.78 

70 

35,837 

2,327 

.064933 

8.54 

98.20 

62.44 

71 

33,510 

2,351 

.070158 

8.10 

103.87 

67.46 

72 

31,159 

2,362 

.075805 

7.67 

109.91 

72.89 

73 

28,797 

2,358 

.081884 

7.26 

116.36 

78.73 

74 

26,439 

2,339 

.088468 

6.86 

123.25 

85.07 

75 

24,100 

2,303 

.095560 

6.48 

130.61 

91.89 

76 

21,797 

2,249 

.103179 

6.11 

138.49 

99.21 

77 

19,548 

2,179 

.111469 

5.76 

146.94 

107.18 

78 

17,369 

2,092 

.120444 

5.42 

155.98 

115.81 

79 

15,277 

1,987 

.130065 

5.09 

165.68 

125.06 

80 

13,290 

1,866 

.140406 

4.78 

176.10 

135.01 

81 

11,424 

1,730 

.151436 

4.48 

187.32 

145.61 

82 

9,694 

1,582 

.163194 

4.18 

199.49 

156.92 

83 

8,112 

1,427 

.175912 

3.90 

212.78 

169.15 

84 

6,685 

1,V68 

.189678 

3.63 

227.42 

182.38 

85 

5,417 

1,111 

.205095 

3.36 

243.73 

197.21 

86 

4,306 

958 

.222480 

3.10 

262.03 

213.92 

87 

3,348 

811 

.242234 

2.84 

282.69 

232.92 

88 

2,537 

673 

.265274 

2.59 

306.23 

255.07 

89 

1,864 

545 

.292382 

2.35 

333.15 

281.14 

90 

1,319 

427 

.323730 

2.11 

363.90 

311.28 

91 

892 

322 

.360987 

1.89 

399.27 

347.10 

92 

570 

231 

.405263 

1.67 

439.95 

389.68 

93 

339 

155 

.457227 

1.47 

486.07 

439.64 

94 

184 

95 

.516304 

1.28 

537.29 

496.45 

95 

89 

52 

.584270 

1.12 

592.71 

561.80 

96 

37 

24 

.648640 

.99 

645.62 

623.70 

97 

13 

9 

.692308 

.89 

693.08 

665.68 

98 

4 

3 

.750000 

.75 

767.74 

721.15 

99 

1 

1 

1.000000 

.50 

961.54 

961.54 

196 


TABLE     No.   17. 

American   Experience  Table  of  Mortality. 


AGE. 

Number 
living. 

Deaths 
each  year. 

Per  cent,  of 
deaths  to 
the    living. 

Expectation 
of  life. 

NET   PREMIUMS. 
American  —  4.  per  cent. 

Level  Ann. 
Prem.  to  in- 
sure  $1,000 
for  life. 

Natural 
Pr'm.  to  in- 
sure $1000 
one  year.' 

Col.  i. 

Col.  2. 

Col-  3. 

Col.  4. 

Col.  5. 

Col.  6. 

10 

100,000 

749 

.007490 

48.72 

10.53 

7.20 

11 

99,251 

746 

.007516 

48  08 

10.70 

7.23 

12 

98,505 

743 

.007543 

47.45 

10.88 

7.25 

13 

97,762 

740 

.007569 

46.80 

11.06 

7.28 

14 

97,022 

737 

.007596 

46:16 

11.26 

7.30 

15 

96,285 

735 

.007634 

45.50 

11.47 

7.34 

16 

95,550 

732 

.007661 

44.85 

11.69 

7.37 

17 

94,818 

729 

.007688 

44.19 

11.91 

7.39 

18 

94,089 

727 

.007727 

43.53 

12.15 

7.43 

19 

93,362 

725 

.007765 

42.87 

12.40 

7.46 

20 

92,637 

723 

.007805 

42.20 

12.67 

7-50 

21 

91,914 

722 

.007855 

41.53 

12.95 

7-55 

22 

91,192 

721 

.007906 

40.85 

13.24 

7-60 

23 

90,471 

720 

.007958 

40.17 

13.55 

7-65 

24 

89,751 

719 

.008011 

39.49 

13.87 

7-70 

25 

89,032 

718 

.008065 

38.81 

14.21 

7'75 

26 

88,314 

718 

.008130 

38.12 

14.57 

7.82 

27 

87,596 

718 

.008197 

37.43 

14.95 

7.88 

28 

86,878 

718 

.008264 

36.73 

15.35 

7.95 

29 

86,160 

719 

.008345 

36.03 

15.77 

8.02 

30 

85,441 

720 

.008427 

35.33 

16.21 

8.10 

31 

84,721 

721 

.008510 

34.63 

16.68 

8.18 

32 

84.000 

723 

.008607 

33.93 

17.18 

8.28 

33 

83,277 

726 

.008718 

33.21 

17.70 

8.38 

34 

82,551 

729 

.008831 

32.50 

18.26 

8.49 

35 

81,822 

732 

.008946 

31.78 

18.84 

8.60 

36 

81,090 

737 

.009089 

31.07 

19.46 

8.74 

37 

80,353 

742 

.009234 

30.35 

20.12 

8.88 

38 

79,611 

749 

.009408 

29.62 

20.82 

9.05 

39 

78,862 

756 

.009586 

28.90 

21.57 

9.22 

40 

78,106 

765 

.009794 

28.18 

22.35 

9.42 

41 

77,341 

774 

.010008 

27.45 

23.19 

9.62 

42 

76,567 

785 

.010252 

26.72 

24.08 

9.86 

43 

75,782 

797 

.010517 

26.00 

25.03 

10.11 

44 

74,985 

812 

.010829 

25.27 

26.04 

10.41 

45 

74,173 

828 

.011163 

24.54 

27.12 

10.73 

46 

73,345 

848 

.011562 

23.81 

28.27 

11.12 

47 

72,497 

870 

.012000 

23.08 

29.50 

11.54 

48 

71,627 

896 

.012509 

22.36 

30.81 

12.03 

49 

70,731 

927 

.013106 

21.63 

32.21 

12.60 

50 

69,804 

962 

.013781 

20.91 

33.70 

13.25 

51 

68,842 

1,001 

.014541 

20.20 

35.29 

13.98 

52 

67,841 

1,044 

.015389 

19.49 

36.98 

14.80 

TABLE      NO.  17.    -CONTINUED 
American  Experience  Table  of  Mortality. 


197 


A.GE. 

Number 
Hying. 

Deaths 
each  year. 

Per  cent,  of 
deaths  to 
the    living. 

Expectation 
of  life. 

NET  PREMIUMS. 
American  —  4  Per  cent. 

Level  Ann. 
Prem.  to  in- 
sure $1,000 
for  life. 

Natural 
Pr'm.  to  in- 
sure $1000 
one  year. 

Col  i. 

Col,  2. 

Col.  3. 

Col  4. 

Col.  5. 

Col.  6 

53 

66,797 

1,091 

.016333 

18.79 

$38.79 

$15.71 

54 

65,706 

1,143 

.017396 

18.09 

40.73 

16.73 

55 

64,563 

1,199 

.018571 

17.40 

42.79 

17.86 

56 

63,364 

1,260 

.019885 

16.72 

45.00 

19.12 

57 

62,104 

1,325 

.021335 

16.05 

47.35 

20.52 

58 

60,779 

1,394 

.022936 

15.39 

49.87 

22.05 

59 

59,385 

1,468 

.024720 

14.74 

52.57 

23.77 

60 

57,917 

1,546 

.026693 

14.10 

55.45 

25.67 

61 

56,371 

1,628 

.028880 

13.47 

58.54 

27.77 

62 

54,743 

1,713 

.031292 

12.86 

61.84 

30.09 

63 

53,030 

1,800 

.033943 

12.26 

65.39 

32.64 

64 

51,230 

1,889 

.036873 

11.67 

69.18 

35.46 

65 

49,341 

1,930 

.040129 

11.10 

73.25 

38.59 

66 

47,361 

2,070 

.043707 

10.54 

77.61 

42.03 

67 

45,291 

2,158 

.047647 

10.00 

82.28 

45.82 

68 

43,133 

2,243 

.052002 

9.47 

87.29 

50.00 

69 

40,890 

2,321 

.056762 

8.97 

92.65 

54.58 

70 

38,569 

2,391 

.061993 

8.48 

98.39 

59.61 

71 

36,178 

2,448 

.067665 

8.00 

104.54 

65.07 

72 

33,730 

2,487 

.073733 

7.55 

111.13 

70.81 

73 

31,243 

2,505 

.080178 

7.11 

118  21 

77.09 

74 

28,738 

2,501 

.087028 

6.68 

125.85 

83.68 

75 

26,237 

2,476 

.091371 

6.27 

134.14 

90.74 

76 

23,761 

2,431 

.102311 

5.88 

143.19 

98.38 

77 

21,330 

2,369 

.111064 

5.49 

153.13 

106.79 

78 

18,961 

2,291 

.120827 

5.11 

164.11 

116.18 

79 

16,670 

2,196 

.131734 

4.74 

176-30 

126.67 

80 

14,474 

2,091 

.144466 

4.39 

189.87 

138.91 

81 

12,383 

1,964 

.158605 

4.05 

204.95 

152.89 

82 

10,419 

1,816 

.174297 

3.71 

221.82 

167.59 

83 

8,603 

1,648 

.191561 

3.39 

240.90 

184.19 

84 

6,955 

1,470 

.211359 

3.08 

262.88 

203.23 

85 

5,485 

1,292 

.235552 

2.77 

288.60 

226.49 

86 

4,193 

1,114 

.265681 

2.47 

318.81 

255.46 

87 

3,079 

933 

.303020 

2.18 

354.03 

291.37 

88 

2,146 

744 

.346692 

1.91 

394.52 

333.36 

89 

1,402 

555 

.395863 

1.66 

441.22 

380.64 

90 

847 

385 

.454545 

1.42 

497.08 

437.06 

91 

462 

246 

.532466 

1.19 

566.27 

511.98 

92 

216 

137 

.634259 

.98 

649.34 

609.86 

93 

79 

58 

.734177 

.80 

736.31 

705.94 

94 

21 

18 

.857143 

.64 

840.75 

824.18 

95 

3 

3 

1.000000 

.50 

961.54 

961.54 

198 


TABLE    No.  18. 


Constructed  from  the  American  Experience  Table  of 
Mortality,  showing  the  chances,  at  a  given  age,  of  dy- 
ing -within  a  specified  number  of  years  thereafter. 


O   C 

8J 

8.s 

8-S 

8| 

gl  g 

Ss 

£~  e 

lit 

«!  £ 

AGE. 

o  c  «^* 

u  G  **• 

•-  >  rt 

g|& 

'2  bflSi 

°  s 

••"  •>  rt 
o  c  ^* 

s*! 

rt^2 

rt'^i? 

rt^° 

rt  -O*  N 

§!§•& 

rt-&£ 

6*0 

3*0 

p*S 

Oj5 

U"o 

U*o 

20 

7.77 

11.67 

15.69 

19.93 

24.65 

30.31 

25 

8.10 

12.27 

16.67 

21.60 

27.48 

3495 

26 

8.18 

12.43 

16.95 

22.05 

28.25 

36.20 

27 

8.27 

12.59 

17.24 

22.55 

29.10 

37.51 

28 

8.37 

12.77 

17.55 

23.11 

30.04 

38.96 

29 

8.47 

12.97 

17.91 

23.74 

31.08 

40.54 

30 

8.59 

13.19 

18.30 

24.43 

32.21 

42.25 

31 

8.71 

13.43 

18.74 

25.21 

33.46 

44.10 

32 

8.85 

13.69 

19.24 

26.07 

34.83 

46.08 

33 

9.00 

13.99 

19.79 

27.02 

36.32 

48.21 

34 

9.17 

14.32 

20.41 

28.06 

37.94 

50.47 

35 

9.35 

14.69 

21.09 

29.22 

39.70 

52.86 

36 

9.55 

15.10 

21.86 

30.48 

41.59 

55.39 

37 

9.78 

15.57 

22.71 

31.87 

43.63 

58.02 

38 

10.03 

16.10 

23.66 

33.39 

45.82 

60.76 

39 

10.31 

16.68 

24.70 

35-04 

48.15 

63.56 

40 

10.63 

17.34 

25.85 

36.83 

50.62 

66.41 

41 

10.99 

18.07 

27.11 

38.76 

53.22 

69.28 

42 

11.40 

18.89 

28.50 

40.85 

55.95 

72.14 

43 

11.86 

19.80 

30.02 

43.08 

58.77 

74.99 

44 

12.37 

20.80 

31.68 

45.47 

61.68 

77.77 

45 

12.96 

21.92 

33.48 

48.00 

64  63 

80.49 

46 

13.61 

22.14 

35.43 

50.67 

67.60 

83.12 

47 

14.34 

24.49 

37.53 

53.47 

70.58 

85.63 

48 

15.15 

25.96 

39.78 

56.38 

73.53 

87.99 

49 

16.04 

27.58 

42.19 

59.37 

76.43 

90.17 

50 

17.03 

29.32 

44.75 

62.41 

79.26 

92.14 

51 

18.12 

31.20 

47.45 

65.48 

82.01 

52 

19.31 

33.24 

50.28 

68.56 

84.64 

53 

20.61 

35.43 

53.23 

71.61 

87.14 

54 

22.03 

37.77 

56.26 

74.63 

89.41 

55 

23.58 

40.26 

59.36 

77.58 

91.50 

56 

25.26 

42.91 

57 

27.07 

45.69 

58 

29.03 

48.60 

59 

31.14 

51.61 

60 

33.41 

54.70 

61 

35.82 

62 
63 

38.39 
41.08 

Explanation.  —  At    age    40,  what    are   the 
chances  of  living  20  years  longer  ?    By  looking 

64 
65 
66 
67 

43.90 
46.83 
49.83 
52.90 

under  the  heading  "Chances  in  100  of  dying 
within  20  years/'  at  the  right  of  age  40,  there  will 
be  found  25.85.    Subtracting  this  from  100  leaves 
74.  15     A  little  more  than  74  chances  in  a  hun  dred 

68 

56.05 

to  live,  and  a  trifle  less  than  26  chances  to  die,  in 

69 

59.15 

the  next  20  years,  and  similarly  with  reference 

70 

62.40 

to  any  other  age  or  time. 

TABLE  No.  19. 


199 


AGE. 

Reserve  Accumulations. 
Actuaries  4  per  cent. 

Face  value  of 
policy. 

Insurance  at 
risk. 

Col.  x. 

Col.  *. 

Col.  3. 

36 

End    1st  year. 

$114.81 

$10,000 

$9,885.19 

37 

"      2d       " 

233.38 

10,000 

9,766.62 

38 

"     3d      " 

355.90 

10,000 

9,644.10 

39 

"     4th     " 

482.47 

10,000 

9,517.53 

40 

"     5th    " 

613.38 

10,000 

9,386.62 

41 

"     6th     " 

748.56 

10,000 

9,251.44 

42 

"      7th     " 

888.43 

10,000 

9,111.57 

43 

"     8th     " 

1,032.89 

10,000 

8,967.11 

44 

"     9th    " 

1,181.60 

10,000 

8,818.40 

45 

"    10th    " 

1,334.12 

10,000 

8,665.88 

46 

"    llth     " 

1,490.16 

10,000 

8,509.84 

47 

"    12th     " 

1,649.17 

10,000 

8",  350.  83 

48 

"    13th     " 

1,811.06 

10,000 

8,188.94 

49 

"    14th     " 

1,975.65 

10,000 

8,024.35 

50 

"    15th     " 

2,143.00 

10,000 

7,857.00 

51 

"    16th     " 

2,312.84 

10,000 

7,687.16 

52 

"    17th     " 

2,484.97 

10,000 

7,515.03 

53 

"    18th     " 

2,959.22 

10,000 

7,340.78 

54 

"    19th    " 

2,835.41 

10,000 

7,164.59 

55 

"   20th    " 

3,013.47 

10,000 

6,986.53 

56 

l<    21st     " 

3,193.20 

10,000 

6,806.80 

57 

"    22d      " 

3,374.33 

10,000 

6,625.67 

58 

"    23d      " 

3,556.89 

10,000 

6,443.11 

59 

"    24th     " 

3,740.63 

10,000 

6,259.37 

60 

"    25th     " 

8,925.28 

10,000 

6,074.72 

61 

"    26th    " 

4,110.22 

10,000 

5,889.78 

62 

"    27th    " 

4,295.20 

10,000 

5,704.80 

63 

"    28th    " 

4,479.76 

10,000 

5,520.24 

•  64 

"    29th    «' 

4,663.63 

10,000 

5,336.37 

65 

"    30th     " 

4,846.38 

10,000 

5,153.62 

66 

"   31st     " 

5,027.75 

10,000 

4,972.25 

67 

<c    32d     " 

5,207.18 

10,000 

4,972.82 

68 

"    33d      " 

5,384.50 

10,000 

4.615.50 

69 

"    34th    " 

5,559.47 

10,000 

4,440.53 

70 

''    85th     " 

5,732.01 

10,000 

4,267.99 

75 

"   40th     «' 

6,550.10 

10,000 

3,449.90 

80 

"    45th     " 

7,281.49 

10,000 

2,718.51 

100 

"    65th     " 

10,000.00 

10,000 

0,000.00 

200 


TABLE  NO.   19.— CONTINUED. 


1  Per  cent, 
of  reserve. 

2  per  cent, 
of  reserve. 

3  per  cent, 
of  reserve. 

4  per  cent, 
of  reserve. 

AGE. 

Col.  4- 

Col.  5. 

Col.  6. 

Col.  7. 

$1.15 

$2.30                $3.45 

$4.60 

36 

2.33 

4.66 

6.99 

9.32 

37 

3.56 

7.12 

10.68 

14.24 

38 

4.82 

9.64 

14.46 

19.28 

39 

6.13 

12.26 

18.39 

24.52 

40 

7.49 

14.98 

22.47 

29.96 

41 

8.88 

17.76 

26.64 

35.52 

42 

10.33 

20.66 

30.99 

41.32 

43 

11.82 

23.64 

35.46 

47.28 

44 

13.34 

26.68 

40.02 

53.36 

45 

14.90 

29.80 

44.70 

59.60 

46 

16.49 

32.98 

49.47 

65.96 

47 

18.11 

36.22 

54.33 

72.44 

48 

19.76 

39.52 

59.28 

79.04 

49 

21.43 

42.86 

64.29 

85.72 

50 

23.13 

46.26 

69.39 

92.52 

51 

24.85 

49.70 

74.55 

99.40 

52 

26.59 

53.18 

79.77 

106.36 

53 

28.35 

56.70 

85.05 

113.40 

54 

30.13 

60.26 

90.39 

120.52 

55 

31.93 

63.86 

95.80 

127.73 

56 

33.74 

67.49 

101.23 

134.97 

57 

35.57 

71.13 

106.70 

142.27 

58 

37.41 

74.81 

112.21 

149.62 

59 

39.25 

78.50 

117.75 

157.00 

60 

41.10 

82.20 

123.31 

164.41 

61 

42.95 

85.9o 

128.86 

171.81 

62 

44.80 

89.59 

134.39 

179.19 

63 

46.64 

93.27 

139.90 

186.54 

64 

48.46 

96.92 

145.38 

193.84 

65 

50.28 

100.55 

150.83 

201.11 

66 

52.07 

104.14 

156.21 

208.28 

67 

53.85 

107.69 

161.53 

215.38 

68 

55.59 

111.19 

166.78 

222.37 

69 

57.32 

114.64 

171.96 

229.28 

70 

65.50 

131.00 

196.50 

262.00 

75 

72.81 

145.62 

218.43 

291.24 

80 

100.00 

200.00 

300.00 

400.00 

100 

INDEX. 

PAGE. 

Abstract  of  Net  Values — Uses  to  the  Insured 53 

Accumulations — Explanation  of   20 

Accumulative  Dividend  Policies 51 

Actuaries'  Table  of  Mortality — By  Whom  Constructed.  .     18 

Actuary — Definition   of    20 

American  Table  of  Mortality — By  Whom  Constructed.  .     19 

Anecdotes — With   Reference   to    Mortality 70 

Assessment  Companies,  Failed  or  Retired 131 

Assessment  System  in  General — Its  Distinguishing  Char- 
acteristics— Requisites  for  Soundness  and  Perma- 
nency   126-130 

Assessment  System — Its  Rise  and  Fall 126 

Assets   21 

Berkshire  Life  Insurance  Company — Letter  from  the — 

With  Reference  to  the  Law  of  1880 86 

Bonus  Policies  51 

Brokerage — Definition  of 22 

California — Non-Forfeiture   Law 101 

Colorado — Non-Forfeiture  Law 102 

Commissions — Definition  of   22 

Committee — Extracts  from  Evidence  Taken  Before — On 

Tontines  45~5o 

Committee — Names  of,  to  Investigate  Tontine  Insurance.     41 

Committee — Report  of — On  Tontine 42 

Companies — Classification  of  79-H3 

Class  A  79-91 

Class  B  92-98 

Class  C  99-113 

Companies — Tontine — Doing  Business  in  Ohio 41 

Company — Life  Insurance   22 

(1)  Stock  Company 22 

(2)  Mutual  Company   22 

(3)  Mixed  Company 23 

Contents  by  Chapters  5 

Continuous  Instalment  Contracts 76 

Deferred  Dividend  Options 75 

Deferred  Dividend  or  Tontine  Policy — Example  of 107 

Deferred     Dividend     Policy — Values     Indorsed     on     a 

Modern 112 

Guaranteed  Benefits  on 113 

Deposit  Laws  of  Iowa  and  Indiana 105-107 

Disappointment  Over  Tontine  Results 40 

Distribution  Policies   51 

Dividend  Accumulations 20 

Dividends — Contribution  System  of 23 

Reversionary   23 

Dividends — Sources  of 69-73 

(1)  From  Savings  of  Interest 69 

(2)  From  Savings  of  Mortality 70 

(3)  From  Savings  of  Expenses 71 

(4)  From  Lapses  and  Forfeitures 72 

(5)  From  Cash  Surrender  Values 73 

(6)  From  Changes 73 


202  INDEX. 

Elimination  of  Restrictions 74 

Endowment  Insurance 29-36 

Endowment  Premiums — Analyzed   30 

Endowments — Matured — Examples  of 33-36 

Age  39  to  55 — Dividends  Used 33 

Age  39  to  49 — Dividends  Used 34 

Age  40  to  55 — Dividends  Used 34 

Age  37  to  55 — Dividends  Used 34 

Age  40  to  60 — Dividends  Used 35 

Age    22    to    35 — Ten    Annual    Payments — Dividends 

Used  to  Purchase  Additions 35 

Age  35  to  45 — Dividends  Used  to  Purchase  Additions.  36 

Endowment — Semi       36 

Equitable  Life  Assurance  Society — Testimony  of,  etc.  .45-48 

Expectation  of  Life 24 

Expense  Element  of  a  Premium 68 

Expenses — Life  Insurance 59 

(1)  Compared  with  Those   of   Fire   Insurance  and 
Railroad  Corporations  59 

(2)  Ratio  of — To  Premiums  on  Gross  Receipts 59 

(3)  Ratio   of — To    Net   Insurance   Claims   Paid — A 
New  Test 60 

Extension  of  Non-Forfeiture  Principles 74 

Failed  or  Retired  Assessment  Companies 131 

Failures — Life  Insurance    53-59 

Fall  of  Assessment  System — Rise  and 126 

Fire  Insurance — Definition  of   15 

Forfeiture — Definition  of  24 

Fraternal  Congress — Mortality  Table 152 

Fraternal  Congress — Expectancy  of  Life 153 

Fraternal  Congress — Natural  and  Net  Level  Premiums..   154 

Fraternal  Orders  I5I-I55 

Guaranteed    Benefits   on   a    Modern    Deferred    Dividend 

Policy    113 

Growth  of  Life  Insurance 61 

Indiana  Deposit  Law   106 

Instalment  Contracts   76 

Insurance  at  Risk  in  Level  Premium  System  Compared 
with  Insurance  at  Risk  in  the  Natural  Premium  Sys- 
tem   117-121 

Insurance — Fire — Definition  of   15 

Life — Definition  of  15 

Life  and  Fire  Compared 15 

Interest— History  of— Table,  etc 156-158 

Interest  Laws  of  the  States 159 

Introduction    7~I4 

Investment  Insurance  77 

Iowa  Deposit  Law,  1873   105 

John  Hancock  Mutual  Life  Insurance  Company — Letter 

From — With  Reference  to  the  Law  of  1880 85 

Kentucky  Non-Forfeiture  Law  95 

Lapse — Definition  of  72 

Law  of  Mortality  17 

Legal  Reserve  in  the  Level  Premium  System  Compared 
with  the  Legal  Reserve  in  the  Natural  Premium 

System  117-121 

Level  Premium — Analysis  of  a 52 

Level  Premium  Compared  with  Natural  Premium 116-120 


INDEX.  203 

Level  Premium  Companies — 

Class  A 79 

Class  B 92 

Class   C 99 

Level   Premium  System 63-113 

Liability — Policy   21 

Total 21 

Life  Insurance — Definition  of 15 

Unanswerable  Arguments  for 15-17 

Loading — Definition  -of  24 

Loss — Definition  of   24 

Maine   Non-Forfeiture    Law,    1877,   and   Amendment   of 

1887  92-94 

Man — As  Productive  Property — Why  He  Should  be  In- 
sured        15 

Massachusetts  Assessment  Law,  1885 — Abstract  of  the.  ..  145 
Massachusetts  Mutual  Life  Insurance  Company — Letter 

from  the — With  Reference  to  Law  of  1880 83-85 

Massachusetts  Non-Forfeiture  Law,  1880 79 

Amendment  of  1887 87 

Amendment  of  1896 88 

New  Law  of  1900 91 

McCall,  John  A. — On  Co-operative  Business 148 

On  Life  Insurance  Failures 55-59 

McClintock,  Emery — Description  of  Tontine  Insurance.  .     37 

Michigan  Non-Forfeiture  Law  of  1881 94 

Missouri  Non-Forfeiture  Law 96 

Mixed  Company — Definition  of 23 

Modern  Level  Premium  Contracts 74-78 

Modern    Deferred    Dividend    Policy — Values    Indorsed 

on  a 112 

Guaranteed  Benefits ' 113 

Mortality — Definition  of  24 

Law  of 17 

Mortality  Tables — How  Constructed 18 

Mortality  Element  of  a  Premium 67 

Mutual  Company — Definition  of 22 

National  Banks  36 

Natural  Premium — Analysis  of  the  116 

Natural  Premium — Compared  with  Level  Premium. .  .117-120 

Natural  Premium  System  in  General 114-125 

New  England  Mutual  Life  Insurance  Company — Letter 

from — With  Reference  to  the  Law  of  1880 82 

New  Jersey  Non-Forfeiture  Law 103 

New  York  Life  Insurance  Company — Testimony,  etc... 48-50 

New  York  Life  Insurance  Law 99 

Revision  of  1892  100 

New  York  Stipulated  Premium  Law 134-141 

Non-Forfeiture  Laws 79-104 

Non-Forfeiture  Principle,  Extension  of 74 

Numerous  New  Policy  Forms 74 

Policies — Assumed  Examples  of — Illustrating  the  Massa- 
chusetts Non-Forfeiture  Law  of  1896 89 

Policies — Examples  of — Issued  by  a  Company  in  Class  C.  104 

(1)  Matured  Endowment,  26  to  45 104 

(2)  Matured  Endowment,  25  to  40 104 

(3)  Matured  Endowment,  25  to  35 105 


204  INDEX. 

Policies — Examples    of — Illustrating   the    Iowa    Law    of 

1873 ; 105 

Policy — Liability  21 

Definition  of 25 

Single-Payment — With  Example  25 

Five-Payment  Life — With  Example 25 

Ten-Payment  Life — With  Example 26 

Fifteen-Payment  Life  27 

Twenty-Payment  Life  27 

Ordinary  Life — With  Example  27 

Term  Life  28 

Renewable  Term  Life  28 

Premium — Definition  of   52 

(1)  Expense  Element  68 

(2)  Mortality  Element   67 

(3)  Reserve  Element 65 

Premium  Notes   52 

Renewable  Term  Insurance — Rates,  etc 28 

Reserve  Accumulation   20 

Reserve — Definition   52 

Reserve  Element  of  a  Premium 65-67 

Restrictions — Elimination  of   74 

Retired  Assessment  Companies — Failed  or 131 

Reversionary  Dividends  23 

Rise  and  Fall  of  Assessment  System 126 

Semi-Endowment  Policies   36 

Semi-Tontine  Insurance  37-51 

Senate  Resolution  No.  100 40 

State   Mutual   Life  Assurance   Company — Letter  from — 

With  Reference  to  the  Law  of  1880 83 

Stipulated  Premium 133-144 

Stipulated  Premium  Law  of  New  York 134-141 

Stock  Company — Definition  of  22 

Surplus — Definition  of  52 

Tables- 
Actuaries'  Table  of  Mortality 194 

American  Experience  Table  of  Mortality 196 

Amount  of  $i  Compounded  Annually,  I  to  50  Years.   172 
Amount  of  $i  Per  Annum  at  Simple  Interest  for  50 

Years 170 

Amount  of  $i   Per  Annum   Compounded  Annually, 

i  to  50  Years 174 

Amount  of  $i  Per  Annum  for  10  Years,  Compounded 

Annually,  n  to  50  Years 176 

Amount  of  $i  Per  Annum  for  15  Years,  Compounded 

Annually,  for  16  to  50  Years 178 

Amount  of  $i  Per  Annum  for  20  Years,  Compounded 

Annually,  21  to  50  Years 180 

Amount  to  be  Invested  and  Compounded  Annually 

for  i  to  50  Years  to  Amount  to  $1,000 186 

Amount  to  be  Invested  Annually  for  10  Years  and 

Compounded  to  Amount  to  $1,000  in   n  to  50 

Years   188 

Ampunt  to  be  Invested  Annually  for  15  Years  and 

Compounded  to  Amount  to  $1,000  in  16  to  50 

Years   190 


INDEX.  205 

Amount  to  be  Invested  Annually  for  20  Years  and 
Compounded  to  Amount  to  $1,000  in  21  to  50 

Years    192 

Assessment  Companies  Failed  or  Retired 131 

Effects  of  Simple  and  Compound  Interest 157 

Elements  of  a  Level  Premium,  Actuaries'  Four  Per 

Cent  166 

Elements  of  a  Natural  Premium,  Actuaries'  Four  Per 

Cent   168 

Expenses  of  Life  Insurance  Companies 59 

Failed  Life  Insurance  Companies  54 

Fraternal  Congress  Mortality  Table 152 

Growth  of  Life  Insurance,  1890-99 62 

Interest  Laws  of  the  States 159 

Legal   Reserve  and  Insurance  at  Risk — Level   Pre- 
mium    117 

Legal  Reserve  and  Insurance  at  Risk — Natural  Pre- 
mium      121 

Life  Insurance  Expenses  59 

Net  and  Gross  Natural  Premiums — American  Four 

and  Actuaries'  Four  Per  Cent 123 

Percentage    of    Reserve    Accumulations — Actuaries' 

Table  -. .   199 

Present  Value  of  $i  Due  in  Any  Year,  From  i  to  50..  182 
Present  Value  of  $i  Per  Annum  Due  in  Any  Year, 

From  i  to  50 184 

Probability  of  Dying — American  Experience  Table..   198 

Tontine  Companies  Operating  in  Ohio  in  1885 41 

Values   Indorsed   on   a   Modern   Deferred   Dividend 

Policy   112 

Tabor,  Mervin — Letters  From  81 

(1)  To  Hon.  Elizur  Wright 81 

(2)  To  the  Massachusetts  Companies 81 

Tontine  Insurance -37-51 

Tontine  Insurance — Fully  Analyzed — Illustrated  by  Ma- 
tured Policies  107-112 

Tontine  Results — Disappointment  Over 40 

Uniform  Per  Centum  Loading  Not  Equitable,  as  Shown 

by  Table  C,  with  Explanatory  Notes 123-125 

Value  of  a  Policy — Net  52 

Values  Indorsed  on  a  Modern  Deferred  Dividend  Policy.  112 
Williams,  Hon.  Ephraim — Remarks  of — On  Assessment 

Insurance  151 

Wright,  Hon.  Elizur — Letter  from — With  Reference  to 

Massachusetts  Law  of  1880 81 


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bound  in  flexible  leather  pocket  book,  50  cents. 

MANUAL  OF  LIABILITY  INSURANCE.-Price:  manilla,  $1.00;  flexible 
leather  cover,  $1.50. 

LAW  OF  LIABILITY.— A  digest  of  the  laws  of  negligence,  with  the  lead- 
ing decisions  of  the  highest  Federal  and  State  Courts  directly  affecting 
liability  insurance.  Price,  $5.00. 

BOURNE'S  MULTIPLICATION  TABLES.— For  multiplying  four  figures 
by  ?ny  number  of  figures,  $1.50.  For  multiplying  three  figures  by  any 
number  of  figures,  50  cents  on  heavy  paper,  75  cents  on  card-board. 

THE  ROBINSONIAN  UNIQUE  CALCULATOR.-A  multiplier  and 
divider.  Price,  $3.00. 

ALSO  NUMEROUS  OTHER  VALUABLE  INSURANCE  WORKS, 
Sole  Agents   for  all   works   handled   by   CHAS.    &   EDWIN    LAYTON 

of  London. 
A  Catalogue  of  Insurance  Publications,  with  descriptive  circulars  of  the 

above  works,  will  be  forwarded  on  receipt  of  five  cents  in  stamps.     Address, 

THE  SPECTATOR  COMPANY,  95  William  St.,  New  York, 


THE  SPECTATOR: 


An  American  Review  of  Insurance. 


PUBLISHED  WEEKLY.  PRIGE,  $4.00  PER  ANNUM, 


(ESTABLISHED    1868.) 

THE  SPECTATOR  is  a  live  and  progressive  insurance 
journal,  noted  for  its  pungent  and  fearless  discussion  of 
all  matters  pertaining  to  the  vast  subject  of  insurance  in 
every  branch.  In  the  many  years  of  its  existence  it  has 
built  up  a  reputation  for  fair  and  honest  treatment  of 
insurance  matters  that  has  made  it  invaluable  to  property 
owners  desiring  insurance  and  to  insurance  men  of  every 
class.  It  contains  the  latest  and  freshest  insurance  news 
from  every  quarter,  bright  and  sparkling  correspondence 
from  the  principal  insurance  centres  of  the  country,  com- 
ments on  current  insurance  events  of  the  day,  with  special  ( 
departments  showing  what  the  underwriters  are  doing 
in  the  different  fields. 

The  most  eminent  writers  on  insurance  in  its  various 
forms  are  contributors  to  its  columns,  and  the  aim  of  its 
proprietors  is  to  present  the  science  of  the  insurance  sys- 
tems in  vogue  without  prejudice  to  any  and  in  fairness  to 
all.  It  is  in  this  spirit  that  Fire,  lyife,  Industrial,  Acci- 
dent, Natural  Premium  I^ife  and  Miscellaneous  Insurance 
Companies,  Associations  and  Societies  are  treated  without 
fear  or  favor.  It  also  gives  the  current  news  from  different 
insurance  centres  each  week,  and  each  number  is  an 
epitome  of  all  matters  pertaining  to  insurance.  It  is  the 
ambition  of  its  proprietors  to  make  THE  SPECTATOR  an  , 
invaluable  journal  to  the  commercial  and  business  world 
and  to  every  person  identified  with  the  insurance  interest 
in  any  capacity. 

Address, 

THE  SPECTATOR  COMPANY, 

95  William  Street,  New  York. 


UNIVERSITY  OF   CALIFORNIA   LIBRARY 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 

QGT  21  1914 

-    &  1914 

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